Asia tocks set records in Japan, dollar gets Fed boost

Shares climbed to record highs in Japan and South Korea on Friday ‌as peace in the Middle East with the reopening of the Strait of Hormuz pulled oil prices even lower and eased inflation fears.

The US dollar was on a tear, ‌hovering near a 13-month high on its major peers, after a hawkish turn from the Federal Reserve led markets to price in more than one rate hike this year. That dragged the ‌yen to the weakest level in two years and intensified speculation that Japanese authorities might have to intervene soon and stem the currency’s slide.

Oil tankers have started sailing through the Strait of Hormuz after the United States lifted its blockade on Iran on Thursday as an interim deal to end the three-month war took effect. Brent crude futures dropped 1.0 per cent on Friday to $US79.03 ($A112.60) a barrel, and were down 9.5 per cent for the week.

Share markets have had a blockbuster week. Japan’s Nikkei gained 0.8 per cent to hit a new record for the fifth ‌straight session, extending its weekly ‌gain to 8.5 per cent. South ⁠Korea jumped 3.1 per cent, adding to its weekly rise of 15.3 per cent.

Mainland China and Hong Kong’s stock markets are closed for the ​Dragon Boat Festival holiday. Taiwan was also on holiday.

Despite market optimism about the resumption of oil flows through the Strait of Hormuz, analysts cautioned that Iran was unlikely to relinquish control over the strait.

“Future governance of the Strait will be led by Iran and Oman, creating scope for Iran to impose a ‘maritime service’ fee,” said Madison Cartwright, a senior geo-economics analyst at the Commonwealth Bank of Australia, noting the toll-free transit was only guaranteed for 60 days.

“It undermines international norms on free navigation and sets a precedent that could be followed by others.”

Wall ⁠Street futures slipped 0.2 per cent after the rally overnight. Intel’s shares jumped 10 per cent to a record high ‌after US President Donald ​Trump said iPhone maker Apple had agreed to work with Intel to design and manufacture its chips in the US.

The US dollar index is set for a weekly ​gain of 1.0 per cent on ‌Friday at 100.78. That pushed the yen to 161.26 a dollar , the lowest since July 2024 and well beyond the 160 level widely seen as a line ​in the sand for Japanese intervention.

The British pound was off 0.1 per cent at $US1.3195 ($A1.8799), after a 0.7 per cent drop overnight as the Bank of England kept interest rates on hold in a 7-2 vote. Greater Manchester mayor Andy Burnham won an election in the north of England on Friday, removing a key obstacle to a leadership challenge ​against ​Prime Minister Keir Starmer.

The dollar’s strength reflected a sharp repricing of the ​Fed rate outlook, after nine of 19 officials signalled higher borrowing costs this year when the ‌central bank held rates steady as expected on Wednesday. New Fed Chair Kevin Warsh vowed to deliver price stability.

That hit the short-term Treasuries hard, with two-year US Treasury yields up 9 basis points this week to 4.1790 per cent, but helped longer-dated bonds as investors were relieved by the drop in oil prices and a central bank unmoved by political pressure to cut rates.

Ten-year yields were down three bps to 4.4510 per cent this week, while 30-year yields slumped seven bps to 4.9010 per cent, about the lowest in two months.

“The curve remained notably flatter than before the ​meeting, reflecting the combination of higher expected policy rates and firmer confidence in the Fed’s inflation-fighting credibility,” said Molly Nickolin, a strategist at Morgan Stanley.

The cash Treasuries market ​is closed in Asia due to the Juneteenth holiday ⁠in the US

Precious metals were under pressure due to a strong dollar. Spot gold slipped 0.5 per cent to $US4,188 ($A5,967) an ounce, ​while spot silver also fell 0.8 per cent to $US65.30 ($A93.03) an ounce.