Japan, South Korea stocks hit records as dollar strengthens on Federal Reserve outlook

SYDNEY: Shares in Japan and South Korea rose to record highs on Friday as lower oil prices eased inflation concerns, while the US dollar stayed near a 13-month high after a hawkish shift in the Federal Reserve’s interest rate outlook.

Oil prices extended their decline after tankers began moving through the Strait of Hormuz following the lifting of a United States blockade on Iran as an interim agreement to end the three-month war took effect.

Brent crude futures fell 1% to $79.03 a barrel and were down 9.5% for the week.

Japan’s Nikkei gained 0.8%, hitting a record high for the fifth consecutive session and taking its weekly gain to 8.5%. South Korea’s benchmark index rose 3.1%, extending its weekly advance to 15.3%.

Mainland China and Hong Kong markets were closed for the Dragon Boat Festival holiday, while Taiwan was also shut.

Analysts said the reopening of the Strait of Hormuz had supported market sentiment, but cautioned that future governance of the route could remain a source of risk.

Madison Cartwright, senior geo-economics analyst at the Commonwealth Bank of Australia, said toll-free transit through the strait was guaranteed for only 60 days and that Iran and Oman were expected to lead future governance of the route.

Wall Street futures slipped 0.2% after an overnight rally. Intel shares had jumped 10% to a record high after United States President Donald Trump said Apple had agreed to work with Intel to design and manufacture chips in the United States.

The dollar index was set for a weekly gain of 1% at 100.78 after Federal Reserve officials signalled the possibility of higher borrowing costs this year.

The yen weakened to 161.26 per dollar, its lowest level since July 2024 and beyond the 160 level widely viewed by markets as a possible trigger for Japanese intervention.

The British pound eased 0.1% to $1.3195 after falling 0.7% overnight, following the Bank of England’s decision to keep interest rates unchanged in a 7-2 vote.

The dollar’s strength followed a repricing of the Federal Reserve outlook after nine of 19 officials signalled higher interest rates this year, even as the central bank left rates unchanged on Wednesday. New Federal Reserve Chair Kevin Warsh said the central bank would focus on restoring price stability.

Two-year United States Treasury yields rose 9 basis points this week to 4.1790%, while 10-year yields declined 3 basis points to 4.4510%. Thirty-year yields fell 7 basis points to 4.9010%, near their lowest level in two months.

Molly Nickolin, a strategist at Morgan Stanley, said the flatter yield curve reflected higher expected policy rates and stronger confidence in the Federal Reserve’s inflation-fighting credibility.

The cash Treasuries market was closed in Asia because of the Juneteenth holiday in the United States.

Precious metals came under pressure from the stronger dollar. Spot gold fell 0.5% to $4,188 an ounce, while spot silver declined 0.8% to $65.30 an ounce.