Stocks rise as oil dips, yen wobbles ahead of BOJ meeting

Asian markets soared and the U.S. dollar steadied on Friday (Sep 19) as investors grappled with global policymakers' efforts to curb inflation. A decline in oil prices bolstered sentiment ahead of an anticipated interest rate hike from the Bank of Japan. The ongoing Middle East war, which has kept oil prices above $100 per barrel and fueled inflation concerns worldwide, has put monetary policy response in the spotlight this week.

Oil supply from the Middle East continues to pose challenges, with Brent crude futures falling 1% to $103.77 a barrel, despite hopes of alternative supply routes. Wall Street's rally, driven by struggling tech stocks, influenced traders' decisions. Bond prices steadied after a week of steep declines, with the 10-year U.S. Treasury surpassing 5% for the first time since 2007.

In Asia, the MSCI's Asia-Pacific index rose 0.55%, while Japan's Nikkei increased 0.9% and South Korea's KOSPI surged 2%. The Bank of England suggested it may need to raise interest rates if the Middle East conflict persists, while the U.S. Federal Reserve has already raised rates for the first time in three years and signaled further hikes.

The European Central Bank also warned of the need for further tightening and raised rates last week. Analysts suggest that if bond yields rise again, volatility could quickly return. For now, market activity indicates that the post-Fed risk-off move has lost momentum. The Japanese yen weakened to 156.23 per U.S. dollar, as traders anticipated the Bank of Japan's rate decision later in the day.

The central bank is expected to raise interest rates to a 31-year high and commit to more policies to tackle inflation. Currency strategists at MUFG believe the BOJ's communication from Governor Ueda and the pace of rate hikes will be crucial for market sentiment. The euro remained steady at $1.148 but faced a 1% weekly drop, its largest decline since June. Gold prices increased by 0.5% to $4,361 an ounce.