Asia shares rise in holiday trade as dollar holds near two-year high

Asia shares rose slightly in holiday-thinned trade on Thursday, extending gains from earlier in the week with little news or data in the way to alter their direction of travel, while the dollar was perched near a two-year high.

As the year-end approaches, trading volumes have begun thinning out and the main focus for investors remains that of the Federal Reserve's rate outlook. Markets in Hong Kong, Australia and New Zealand were closed for a holiday on Thursday.

Since Fed Chair Jerome Powell primed markets for fewer rate cuts next year at the central bank's last policy meeting of the year, traders are now pricing in just about 35 basis points worth of easing for 2025.

That has in turn lifted US Treasury yields and the dollar, with the greenback's renewed strength a burden for commodities and gold.

The benchmark 10-year yield was last steady at 4.5967 per cent, having risen above 4.6 per cent for the first time since May 30 earlier in the week. It is up roughly 40 basis points for the month thus far. The two-year yield similarly firmed at 4.3407 per cent. [US/]

"Given December's hawkish cut, we believe the Fed will skip at the January FOMC meeting and wait for more data before definitely resuming, or potentially ending, this cutting cycle," said Tom Porcelli, chief US economist at PGIM Fixed Income.

"Given the Fed's shift to less accommodation paired with continued focus on both sides of the dual mandate, we believe the market will have more intense emphasis on economic events in the new year."

In currencies, the dollar was perched near a two-year high against a basket of currencies at 108.15, and was on track for a monthly gain of more than 2 per cent.

The Australian and New Zealand dollars were meanwhile among the biggest losers against a dominant greenback on Thursday, with the Aussie falling 0.45 per cent to $0.6241. The kiwi slid 0.51 per cent to $0.5650.

The euro eased 0.18 per cent to $1.0398, while the yen languished near a five-month low and last stood at 157.45 per dollar.

Japan's government is set to compile a record $735 billion budget for the fiscal year starting in April due to larger social security and debt-servicing costs, adding to the industrial world's heaviest debt, a draft seen by Reuters showed.

Ending on a high

MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.04 per cent and was headed for a weekly rise of nearly 2 per cent, taking a cue from its counterparts on Wall Street earlier in the week.

S&P 500 futures edged 0.02 per cent higher, while Nasdaq futures advanced 0.13 per cent.

EUROSTOXX 50 futures rose 0.04 per cent.

World stocks looked set to end the year on a high with a second consecutive annual gain of more than 17 per cent, unfazed by escalating geopolitical tensions and various economic and political headwinds globally.

That is mostly thanks to a second year of huge gains for shares on Wall Street as artificial intelligence fever and robust economic growth sucked more global capital into US assets.

"At first glance, markets appear to suggest exceptional exuberance that has presided over 2024," said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank.

"Notably, US bulls high on American exceptionalism have not trampled on ebullience elsewhere."

Japan's Nikkei jumped 0.38 per cent and was on track to end the year with a more than 17 per cent gain.

China's CSI300 blue-chip index fell 0.26 per cent while the Shanghai Composite Index lost 0.22 per cent, though both were headed for yearly gains of more than 10 per cent each, helped by a step-up in support from Chinese authorities in recent months to shore up an ailing economy.

Elsewhere, bitcoin last traded 0.5 per cent higher at $98,967, having fallen from a record high above $100,000 on the back of the Fed's hawkish repricing.

Russian companies have begun using bitcoin and other digital currencies in international payments following legislative changes that allowed such use in order to counter Western sanctions, Finance Minister Anton Siluanov said on Wednesday.

In commodities, Brent crude futures rose 0.18 per cent to $73.71 a barrel, while US crude gained 0.21 per cent to $70.25 per barrel. [O/R]

Spot gold ticked 0.5 per cent higher to $2,626.36 an ounce. [GOL/]