Hideyuki Sao

TOKYO, Reuters – Asian shares rose on Friday after a surprise rise in U.S. inflation. Investors now believe that there will be no more price increases.

MSCI’s Asia-Pacific broadest index, outside Japan, rose 0.7% to its highest point in just two weeks. However it gained 1.1% due to strong earnings.

U.S. stock markets were up 0.3% following a mixed session Thursday. They ended 0.06% lower, while the tech-heavy Nasdaq gained 0.52%.

Following a surprisingly strong U.S. inflation report, stock markets around the world saw their largest drop in over a week on Wednesday.

U.S. consumer prices index increased 6.2% in October year-on-year, marking the highest increase since November 1990.

It is important to monitor inflation. However, stock prices can crash rapidly if it turns out that the Federal Reserve was wrong and has to quickly raise interest rates. It’s far from where we are right now,” Norihiro Futo, chief investment strategist at Mitsubishi UFJ. (NYSE:) Morgan Stanley Securities.

Although inflation data suggests that current price spikes caused by global supply shortages could be more durable than people had expected, investors believe inflationary pressure will ultimately ease rather than increase.

Hirokazu Kabeya, Daiwa Securities’ chief global strategist, said that inflation may subside if we can get past the holiday season at year-end, which is when demand should have been peaking.

The U.S. is expected to see holiday sales rise by 8.5%-10% this year. However, some Americans may be buying earlier because they are worried about the supply chain. “If that is true, we may see an increase in retail sales next week. This would be good news for stocks,” he said.

U.S. retail sales for October are due next Tuesday.

After a Thursday market holiday, bond yields climbed. The 10-year U.S. Treasuries yield rose 1.9 basis points on Friday to 1.572%.

The money market has already predicted two rate rises in the next year.

After Wednesday’s high U.S. inflation reading, dollar was stable on the currency exchange. It was a sign that Fed officials were preparing to tighten their monetary policies faster than they had previously expected.

A dollar-to-dollar index rose to 95.264 at a sixteen month high. The euro dropped to $1.1449 near its lowest level since July 2011.

The yen dropped to 114.26 dollars per dollar last month, close to the four-year low. Commodity currencies like the Australian dollar or the Canadian dollar had been on the back foot.

Australian Dollar fell five weeks to $0.7286, and Canadian Dollar dropped to C$1.2588 per USD. The last time this happened was in October.

Makoto Nioji, chief FX strategist for SMBC Nikko Securities said that it is fascinating to see if investors sell commodity currencies in anticipation of Fed tightening.

Oil prices dropped slightly due to a weaker U.S. currency and concerns about increasing U.S. inflation. This was after OPEC cut their 2021 oil demand forecast due high prices.

Futures fell 0.3% at $82.56 per barrel, while U.S. West Texas Intermediate futures (WTI), dropped 0.33% and was $81.32 per barrel.

Investors seeking inflation hedges kept gold prices at their five-month peak on Wednesday. The last time they were at $1,862 an ounce was Wednesday’s peak of $1,868.5.