Dollar Plummets as Investors Bet on Larger Fed Rate Cut

The dollar tumbled against the yen, and gold surged to a new high as investors speculated on a significant Federal Reserve rate cut. Shares in Asia rose as expectations for a 50-basis point rate cut increased. Crude oil continued its upward trend following a recent hurricane in the Gulf of Mexico.

The dollar slumped against the yen on Friday while gold reached an all-time high, driven by investor bets on a significant Federal Reserve interest rate cut next week. This speculation was fueled by media reports suggesting officials' decision was challenging.

Asian shares advanced as trader expectations for a 50-basis point U.S. rate cut on Sept. 18 climbed back to 41%, influenced by reports from the Financial Times and Wall Street Journal describing the decision as 'a close call.' Tony Sycamore, an IG analyst, described the development as a twist in the rate cut debate, noting fluctuating bond futures and dollar-yen rates.

The dollar dropped 0.41% to 141.225 yen, nearing Wednesday's yearly low of 140.71. The yen gained this week from hawkish statements by Bank of Japan officials, particularly Naoki Tamura, who expressed concerns over rising inflation risks. The dollar index slipped to a one-week low of 101.03. Elsewhere, the euro rose 0.09% to $1.1084 after ECB President Christine Lagarde downplayed an October rate cut.

Gold surged to a record $2,567.93, following a 1.9% climb, buoyed by the weaker dollar. MSCI's Asia-Pacific shares index, excluding Japan, climbed 0.53%. Hong Kong's Hang Seng led regional gains with a 1.13% rise, while mainland China's blue chips added 0.24%, Australia's benchmark increased by 0.31%, and South Korea's Kospi remained flat. Japanese stocks lagged due to the stronger yen, with the Nikkei falling 0.48%.

Japan, China, and South Korea are approaching long weekends, affecting trading activity. U.S. stock futures were stable post-Thursday gains. Crude oil prices continued their ascent as producers evaluated Hurricane Francine's impact on Gulf of Mexico output. U.S. West Texas Intermediate crude rose 0.54% to $69.34 per barrel, and Brent crude added 0.47% to $72.31.

(With inputs from agencies.)