SINGAPORE: Asian stocks rose to their highest in six weeks on Friday and a blistering rally in precious metals showed no signs of tempering as investors sought to close out the year on a high while a softer yen kept intervention risk in the fray.
Markets in Australia, Hong Kong and most of Europe are closed on Friday, with liquidity expected to be thin. Still, investors are attempting a year-end rally, with risk appetite perking up this week.
Japan's Topix climbed to a record high and was last up 0.5%. South Korea's benchmark index rose 0.6%, taking its annual gain to 72% and making it the best-performing major stock market in the world this year.
China's blue-chip stock index was 0.27% higher, on pace to clock an 18% gain for the year, its strongest annual surge since 2020.
That pushed MSCI's broadest index of Asia-Pacific shares to its highest level since November 14. The index was last up 0.4% and has gained 25% so far this year.
Beyond stocks, precious metals are in the spotlight with spot silver surging over 4% to a record high on Friday, while gold also hit a record peak, last fetching $4,503.39 per ounce.
Soojin Kim, commodities analyst at MUFG, said the rally has been supported by heavy central bank purchases, strong inflows into gold-backed ETFs, and investor concerns over currency debasement and rising global debt.
Gold has soared over 71% this year, on pace for its strongest annual gain since 1979, while silver is up 158% for the year.
"With major banks forecasting further gains into 2026, the strength of physical demand and persistent geopolitical and monetary uncertainties suggest the precious metals rally could continue," Kim said in a note.
DOLLAR'S DECEMBER BLUES
Heading into the new year, investors are focused on when the U.S. Federal Reserve might further cut interest rates and by how much, with traders pricing in at least two cuts in 2026, although they do not expect the Fed to move before June.
The central bank itself has projected one more cut next year but a divided Fed has left investors on edge about the U.S. policy outlook.
Investors are also waiting for President Donald Trump to nominate a Fed chair to replace Jerome Powell, whose term ends in May, and any inkling of Trump's decision could sway markets in the coming week.
The U.S. dollar has been under pressure as a result, pushing the euro, sterling and the Swiss franc to recent highs.
The dollar index, which measures the dollar against six rivals, was poised for a 0.8% drop for the week, its weakest weekly performance since July. It was steady at 97.935 in Asian hours on Friday.
The Japanese yen was a shade weaker at 156.23 per U.S. dollar but on course for a 1% weekly rise, its biggest weekly gain since the end of September, after strong bouts of verbal warnings from Tokyo that have left intervention risks on the table.
The yen has weakened despite the Bank of Japan delivering a well-telegraphed rate hike last week as markets interpreted comments from Governor Kazuo Ueda to suggest the central bank will not rush further rate hikes.
Analysts and sources familiar with the central bank's thinking told Reuters the ambiguous communication is likely aimed at leaving flexibility on the exact rate-hike timing and belies the BOJ's resolve to keep pushing up borrowing costs.
Still, investors are vigilant to official yen-buying from Tokyo, particularly as trading volumes thin towards the year-end, which analysts say is an opportune time for authorities to take action.
Benchmark Japanese government bonds gained slightly on Friday as expectations for restrained debt issuance helped yields retreat from a 26-year peak as Prime Minister Sanae Takaichi sought to ease market concerns over her expansionary fiscal policy. - Reuters
