Market Pivot: Asia Capitalizes on Fed Rate Cut Signals While Asian Stocks and Bitcoin Race Higher

The Week That Changed Everything

Thursday brought a sharp pivot in market sentiment across Asia, with traders sensing a major shift in Federal Reserve policy direction. The MSCI Asia-Pacific Index (ex-Japan) posted a solid 0.27% gain, signaling conviction that a December rate cut was becoming increasingly probable. More dramatically, Japan’s Nikkei and South Korea’s Kospi both surged over 1%, breaking free from weeks of choppy trading as the holiday-shortened week wrapped up.

The culprit? A seismic shift in rate cut probabilities. Just one week ago, traders pegged December rate cut odds at a mere 30%. By Thursday, CME FedWatch data showed that probability had exploded to 85%—a stunning reversal that rippled through every asset class.

Why the Fed Suddenly Looks Dovish

The catalyst was unmistakable: U.S. labor market cooling. New jobless claims hit a seven-month low, but that’s not the full story. Fed officials Mary Daly and Christopher Waller delivered comments that spooked inflation hawks and delighted rate-cut bulls. George Boubouras, managing director at K2 Asset Management, nailed the paradox: “Although core inflation remains above target, the U.S. 10-year breakeven inflation rate at around 2.25% reflects that markets are generally comfortable with inflation expectations.”

Translation? Inflation isn’t going rogue anymore. The labor market is showing cracks. A December rate cut isn’t just possible—it’s priced in.

Dollar Weakness, Currency Rotation in Play

As Fed rate-cut bets mounted, the dollar took a breather. The dollar index slipped 0.28% to sit at 99.523, while the euro climbed to a seven-day high of 1.16045. Sterling didn’t miss the memo either, rallying to $1.3247—a one-month peak—after UK Finance Minister Rachel Reeves presented a budget that eased fiscal concerns.

But the real action was in the yen, where traders faced a peculiar dilemma.

Japanese Yen Under Pressure: Intervention Looms

The yen remains the week’s wildcard. It has depreciated nearly 10 units since early October, a steep slide fueled by the gap between U.S. and Japanese rate expectations. Thursday’s action saw the yen trade around 156.16 per dollar, and beneath those headline numbers lies a critical tension: Tokyo’s massive spending ambitions are clashing with currency stability.

Reuters reports suggest the Bank of Japan may prepare rate hike support as soon as next month—a bold move to anchor the currency and prevent further yen weakness. Prime Minister Sanae Takaichi signaled resolve, dismissing fears of a fiscal crisis similar to the UK’s “Truss moment.” The subtext is clear: Tokyo won’t let the yen collapse unchecked, though defending it against a Fed rate cut cycle will be no easy feat. With the yen hovering and traders eyeing intervention risk, the 100000 yen level—roughly $640 USD equivalent—serves as a psychological marker for how far this currency pair has run.

China’s Property Crisis Deepens

While equity markets danced higher on rate-cut euphoria, the Chinese property sector sent distress signals. China Vanke, a state-backed developer, is seeking bondholder approval to defer repayment on a 2 billion yuan ($282.6 million) onshore bond—its first extension request. If approved, this move could reignite fears across both the property and financial sectors, reminding investors that monetary stimulus in the U.S. doesn’t automatically fix structural problems elsewhere.

Crypto Joins the Rally

Bitcoin reclaimed the spotlight, trading above $90,000 by Thursday—a nearly 3% pop that positions the crypto market to snap a four-week losing streak. The catalyst? Lower rate expectations are gold for risk assets, and Bitcoin, despite its uncorrelated mystique, tends to rally when liquidity expectations improve and real rates decline.

Gold, meanwhile, held steady at $4,164.81 per ounce after posting a 0.8% gain the day prior, suggesting investors remain hedged but not panicked.

The Takeaway

Thursday’s session revealed a market in transition. The Fed’s dovish shift is reshaping everything: equity rotation favors cyclicals and international plays, the dollar is correcting, and risk assets from Bitcoin to equities are catching bids. The Japanese yen’s struggle adds another layer of complexity—particularly as the BOJ contemplates its own policy tightening.

With U.S. markets closed Friday for an abbreviated Thanksgiving session, the week’s thesis is already baked in: rate cut expectations have triggered a broad reassessment of 2024’s final months. Traders should watch for any contradictory economic data or Fed speak that could reverse this narrative, but for now, the tide has clearly shifted toward accommodation.