Asian Markets Sputter as Dollar Rebounds and Investors Await Central Bank Decision

Asian shares experienced fluctuating movements on Friday, with the dollar rebounding from one-year lows ahead of an anticipated speech by the U.S. Federal Reserve Chair. The Japanese yen strengthened as expectations grew for potential interest rate hikes. European and U.S. futures showed mixed signals, while commodity prices faced a downturn.

Asian shares wavered on Friday, with the dollar recovering from one-year lows as investors anticipated a key speech from the U.S. Federal Reserve Chair. Market participants look for confirmation of U.S. rate cuts potentially starting in September. The Japanese yen gained 0.4% to 145.63 per dollar, as Bank of Japan Governor Kazuo Ueda indicated a readiness to raise interest rates if economic conditions align with forecasts.

The Nikkei index initially dipped but rebounded to a fresh three-week high, closing 0.4% higher as investor concerns about Ueda's hawkish stance eased. European markets are set for a muted opening, with EUROSTOXX 50 futures flat and FTSE futures rising 0.4%. U.S. futures showed moderate gains, with S&P futures and Nasdaq futures up 0.3% and 0.6%, respectively.

Early data revealed Japan's core inflation continued to rise for the third consecutive month, yet a slowdown in demand-driven price increases suggests no immediate pressure for rate hikes. Analysts, including Krishna Bhimavarapu from State Street Global Advisors, predict that a stronger yen and energy subsidies will temper inflation in the near future.

MSCI's broadest index of Asia-Pacific shares, excluding Japan, trimmed its earlier losses, down just 0.1% for the day but headed for a weekly gain of 1%. The market remains cautious ahead of a significant speech by Federal Reserve Chair Jerome Powell in Jackson Hole, with investors looking for hints about future monetary policy. Overnight, Wall Street's sentiment shifted to caution, reflecting in minor fluctuations across Asian and European markets.

(With inputs from agencies.)