Oil prices rose on Friday and were on track for a big monthly gain as reports that some tankers were forced to turn around in the Strait of Hormuz prompted traders to reassess shipping flows through the key waterway.
"The shock absorbers in oil markets are dwindling fast, so a failure to de-escalate would be materially costlier than previous rounds of tension," wrote Teddy Bunzel, head of Lazard Geopolitical Advisory at Lazard Asset Management.
Shipments through the crucial Strait of Hormuz remain disrupted. The alternative route through the Bab el-Mandeb Strait has also come under attack from the Iran-backed Houthis, further worsening the outlook.
The yen JPY= strengthened 0.17% against the greenback to 159.27 per dollar, following sharp gains on Thursday after Japan conducted yen-buying, dollar-selling intervention, according to a market source.
The U.S. Treasury has also told several banks it may intervene in the yen market on Friday and that they should "stand ready for future action," a source familiar with the matter told Reuters.
The BOJ kept interest rates unchanged on Friday, but signalled its resolve to push up borrowing costs.
At a press conference, BOJ Governor Kazuo Ueda said inflation risks were skewed to the upside, and the central bank was prepared to speed up the pace of rate hikes should monetary conditions be accommodative.
Analysts note that intervention has had limited success in providing durable support for the yen, and say the currency's outlook is unlikely to improve unless the BOJ raises rates.
"The yen fundamentals and technicals are very poor. Intervention is not a credible, long-term solution," said Lauren van Biljon, senior portfolio manager, rates and FX, at Allspring Global Investments.
The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.03% to 100.04, with the euro EUR= down 0.1% at $1.1515.
Spot gold XAU= fell 1.45% to $4,043.12 an ounce.
Major U.S. indexes and global stocks
The Dow Jones Industrial Average .DJI rose 0.47% to 52,452.14, the S&P 500 .SPX gained 0.43% to 7,469.60 and the Nasdaq Composite .IXIC was up 0.55% at 25,261.38.
Gains were limited by a nearly 10% drop in Apple shares after a disappointing forecast showed that the iPhone maker was struggling to secure enough components as the AI-driven data-center boom strains global supply chains.
South Korea's battered KOSPI .KS11 leapt 17.91%, mounting a record comeback after heavy losses earlier this week. The tech-heavy bourse, still about 30% off its all-time high, has become emblematic of the sharp swings in investor sentiment towards AI-related stocks.
MSCI's gauge of stocks across the globe .MIWD00000PUS rose 11.73 points, or 1.06%, to 1,118.77.
The pan-European STOXX 600 .STOXX index fell 0.12%, while Europe's broad FTSEurofirst 300 index .FTEU3 fell 0.09%.
Hawkish Fed speak sends bond yields higher
Longer-dated Treasury yields jumped after three Fed policymakers who had dissented in favor of a rate hike at this week's meeting made their case publicly on Friday for higher rates.
The Fed kept rates unchanged — a widely expected outcome that aligned with market pricing, which showed a roughly one-in-three chance of a hike.
Dallas Federal Reserve President Lorie Logan said on Friday that without "modest action in the near term," the U.S. central bank will not be able to get inflation back on track to its 2% target, given a solid labor market that is strengthening and upside risks to price pressures.
That echoed similar comments by Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari.
The yield on benchmark U.S. 10-year notes US10YT=RR rose 7.58 basis points to 4.739%, the highest since January 2025.
The 30-year bond US30YT=RR yield gained 6.43 basis points to 5.2713%, the highest since mid-2007.
Traders are now pricing in 69% odds of a rate increase at the Fed's September meeting.
Wall Street rises on Amazon and Microsoft earnings
U.S. stocks rose on Friday as strong earnings from Amazon and Microsoft drew investors back into the AI trade, while longer-dated Treasury yields hit new multi-year highs on fears that rising oil prices could fuel inflation.
Currency markets also stayed on alert for further intervention, a day after Japanese authorities stepped in to support the yen, according to a market source.
Microsoft MSFT.O on Wednesday forecast strong cash generation through fiscal 2027. Amazon AMZN.O followed a day later with its strongest cloud growth in more than four years, reassuring investors eager for proof that massive AI spending is paying off.
"There's significant drawdowns over the course of the month and everything related to artificial intelligence," said Art Hogan, chief market strategist at B. Riley Wealth.
"Now with the hyperscalers, in particular Amazon, coming out and talking about the amount of revenue and demand for their cloud services, which in general is a lot of the small and medium businesses, that's put a significant interest back into the neo-cloud companies and their offerings as it pertains to rollout of AI strategies.”
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