Asian markets hit a three-year high on Friday as USD dropped to multi-year lows

Asian shares climbed on Friday to their highest level in more than three years, following strong gains on Wall Street. At the same time, the dollar weakened amid doubts over the Federal Reserve’s independence and rising expectations for early rate cuts.

Global stock markets looked set to finish the week with gains, as worries about unrest in the Middle East and disputes over tariffs and trade deals eased for now.

MSCI’s index of Asia-Pacific shares outside Japan reached its strongest point since November 2021 as reported by the Reuters. It later closed 0.2% higher and was on track for a 3% gain over the week. Japan’s Nikkei jumped 1.5%, briefly topping 40,000 for the first time since January.

European futures pointed higher, with contracts on the EUROSTOXX 50 and Germany’s DAX both up 0.6%, and the FTSE up 0.16%. In the US, stock futures were little changed after Wall Street closed near record highs on Thursday, buoyed by growing bets on Fed rate cuts.

Market focus shifted to a Wall Street Journal report that President Donald Trump might name a replacement for Fed Chair Jerome Powell by September or October. Traders fear such a move could undermine the Fed’s credibility.

The dollar fell to a three-and-a-half-year low on Friday and was headed for a 1.4% weekly drop, its biggest in over a month. Year to date, it has lost more than 10%. If this holds through the end of the week, it would mark its biggest first-half fall since free-floating exchange rates began in the early 1970s.

Early on Friday, the euro traded at $1.1693 after touching $1.1745—the highest since September 2021. Sterling fetched $1.3733, just below its October 2021 peak of $1.37701. The dollar index stood at 97.378, near its lowest since March 2022 and set for a 2% decline in June—its sixth consecutive monthly loss.

Elsewhere, the Japanese yen was at 144.73 per dollar, and the Swiss franc traded at 0.8013, close to a decade-high. German Chancellor Friedrich Merz said the EU should pursue a “quick and simple” trade deal with the US rather than a “slow and complicated” one. A White House official also confirmed that Washington and Beijing have agreed on an expedited process for rare earths shipments.

In the bond and commodity markets, US Treasury yields in Asia were stable, with the two-year note at 3.7418% and the 10-year at 4.2554%.

Oil prices headed for their biggest weekly fall in months after a ceasefire between Iran and Israel eased supply worries. Brent crude rose 0.41% to $68.01 a barrel and US crude added 0.46% to $65.53, though both were down more than 10% for the week. Spot gold slipped 0.23% to $3,320.25 an ounce.

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