Asian markets rose to their biggest three-year highs on Friday following a robust Wall Street rally and a series of upbeat geopolitical and trade news. The investors welcomed reports that the U.S. had reached an agreement with China on accelerating rare earth exports, which are essential in the production of technology and defense.
Japan’s Nikkei index rose 1.4%, crossing the 40,000 mark for the first time in five months. While Chinese markets remained relatively flat, the CSI 300 index was on track to notch its best weekly gain since November 2024. In broader markets, MSCI’s Asia-Pacific index (excluding Japan) hit levels last seen in November 2021, showing renewed investor confidence across the region.
Europe caught up, with EUROSTOXX 50 and DAX futures jumping more than 0.5%, and U.S. S&P 500 and Nasdaq futures also making minor advances.
US Dollar Dives Further Amid Uncertainty at Fed
The U.S. dollar is facing pressure as worries intensify regarding the Federal Reserve’s independence. Speculation that President Trump would replace Fed Chair Jerome Powell by September or October has concerned investors, with them fearing political influence in monetary policy.
The dollar index will mark its biggest weekly drop in more than a month down 1.4% and has fallen over 10% in 2025 to date. If it keeps going, this may end up its worst first-half record since the 1970s. Meanwhile, the euro and British pound are robust. The euro hit a three-year high of $1.1688, and the pound was at $1.3725.
Traders are also speculating on further U.S. interest rate reductions in the latter half of this year, particularly following recent economic indicators of a slowing economy. Attention then shifts to the release of the U.S. core PCE price index—the Fed’s inflation benchmark—to determine if it reinforces easing price pressures.
Oil Declines, Gold Retreats in Less Tense Geopolitical Environment
In the commodities market, oil prices recovered a bit on Friday but still closed lower by more than 10% for the week. A ceasefire between Iran and Israel mitigated fears of supply disruptions of oil in the Middle East. Brent crude traded at $68.12 a barrel, while U.S. crude reached $65.63.
Gold, which normally increases under uncertainty, fell 1% to $3,294.50 an ounce, as markets shifted focus back to interest rate projections and exchange rate trends.
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