Stocks rise as oil dips, yen wobbles ahead of BoJ

Asian stocks climbed and the dollar remained stable on Friday as global policymakers intensified efforts to curb inflation, with a decline in oil prices boosting investor sentiment ahead of a potential Bank of Japan (BoJ) rate hike. The prolonged war in the Middle East has contributed to oil prices staying above US$100 per barrel, fueling inflation concerns worldwide.

Investors also considered alternative oil supply routes from the Middle East in hopes of reaching markets, causing Brent crude futures to fall by 1 per cent to US$103.77 a barrel, despite lingering concerns over strikes between Saudi Arabia and Yemen's Houthis.

Wall Street's overnight rally, driven by downbeat tech stocks, influenced traders. Bond prices stabilized after another severe sell-off that pushed the 10-year US Treasury yield above 5 per cent, its highest level since 2007. In Asia, the MSCI's Asia-Pacific index outside Japan rose 0.55 per cent, while Japan's Nikkei increased by 0.9 per cent and South Korea's KOSPI surged 2 per cent.

The Bank of England suggested it might need to raise interest rates if the Middle East conflict persists, while the Federal Reserve increased rates for the first time in three years and signaled additional hikes in the future. The European Central Bank also warned of the need for further tightening, raising rates last week.

Yen weakened to 156.23 per US dollar, and traders anticipated the BoJ's policy decision later in the day, with the central bank planning to raise interest rates to a 31-year high to tackle inflation. The critical factor for markets is not just whether the BoJ raises rates, but also how they are raised and Governor Ueda's communication about the bank's future approach.

The yen has rallied this month due to expectations of faster BoJ rate hikes and early repatriation signs from Japanese investors, but has lost some gains this week as the US central bank adopted a more hawkish stance. If the BoJ hikes rates again, as expected, volatility could resurface, according to Chris Weston, head of research at Pepperstone.