By Kevin Buckland
TOKYO (Reuters) – The dollar was on the defensive on Friday following its biggest drop in a month against major peers, as it tracked a retreat in U.S. yields from nearly three-month highs after depressed Treasury prices drew buyers.
Asian stocks were mixed, with some markets tracking Wall Street gains from overnight, while Japan’s Nikkei struggled after the yen rebounded strongly from a three-week trough to the dollar.
Hong Kong’s Hang Seng rose while mainland blue chips were flat.
For the week though, the dollar was set for a fourth straight weekly rise and the 10-year Treasury yield for a sixth, driven by a run of robust U.S. economic data that signals a very patient approach to Federal Reserve interest rate cuts.
Surging bond yields have spooked stock investors, putting the MSCI world equities index on track for a 1.2% slide this week.
Crude oil is set for a weekly advance amid simmering risks to output from the conflict in the Middle East. Safe-haven gold is headed for a third winning week.
The Nikkei sank 1% as of 0154 GMT, while the Hang Seng gained 0.5%. Mainland blue chips were flat. Taiwan’s benchmark rose 0.5%.
In Japan, an election on Sunday may see the ruling coalition lose its parliamentary majority, with the potential political instability adding another weight on the stock market there.
A parade of potentially pivotal events begin next week with the monthly U.S. payrolls report on Friday. The U.S. presidential election follows on Nov. 5, with a Fed policy decision two days later.
Earnings reports are also due from such mega-cap tech names as Alphabet, Amazon, Apple, Meta, and Microsoft.
“There remains a degree of caution in the markets, with the performance of equities mixed due to the combination of macroeconomic, earnings and political risk on the horizon,” said Kyle Rodda, senior financial market analyst at Capital.com.
In terms of economic data overnight though, “the narrative was a positive one and opened up the room for a touch of risk-taking,” Rodda said.
Weekly data showed an unexpected drop in new applications for U.S. unemployment aid overnight.
A much stronger-than-expected payrolls report for September was the catalyst for a repricing of the Fed’s rate-cutting path since the start of this month.
The 10-year Treasury yield ticked down to 4.1918% on Friday, following a four basis-point slide in the previous session. It touched a three-month top of 4.26% on Wednesday.
The dollar index, which measures the currency against six major peers, was little changed at 104.06 after retreating from Wednesday’s three-month peak of 104.57. For the week though, it has advanced 0.56%.
The dollar was flat at 151.835 yen, and the euro edged down 0.04% to $1.082325.
A rise in speculation of a Donald Trump win in some betting markets has supported U.S. yields and the dollar in recent days, due to the Republican candidate’s inflationary tax and tariff policies.
Gold eased slightly on Friday to $2,729 per ounce, but was on track to rise 0.22% this week.
Brent crude futures climbed 0.6% to $74.83 a barrel, while U.S. West Texas Intermediate crude was up 0.6% at $70.62 a barrel.
(Reporting by Kevin Buckland; Editing by Sonali Paul)