Asia shares eye five-month streak; yen buckles

Asian stocks are headed for a fifth straight month of gains, bolstered by the growing view that cooling inflation in the US would allow the Federal Reserve to ease rates later in 2024.

Friday is packed with risk events for markets after a relatively subdued rest of the week, with US President Joe Biden and his Republican rival Donald Trump engaging in their first debate of the year ahead of November's presidential elections.

Chinese markets, in particular, will be looking out for comments about the trade relationship with Beijing, which has further soured in recent years.

On the data front, figures for May's US core personal consumption expenditures (PCE) price index - the Fed's preferred measure of inflation - are due later on Friday, and could offer further clarity on the US rate outlook.

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"If tonight's core PCE inflation were to come in much hotter than the 2.6 per cent expected and after upside surprises to Canadian and Australian inflation data this week, it would inflame concerns that the decline in global inflation has bottomed out and may have reaccelerated in some countries," said Tony Sycamore, a market analyst at IG.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.06 per cent early in the Asian session, and was on track to gain some 3.2 per cent for the month, its best performance since February.

Growing expectations of an imminent Fed easing cycle and momentum from the artificial intelligence boom have sparked a risk rally across stock markets and catapulted Wall Street to record highs, in turn lifting Asian shares.

Traders are now pricing in a 64 per cent chance of a first Fed cut in September, up from 50 per cent a month ago, according to the CME FedWatch tool.

Japan's Nikkei jumped 0.78 per cent, reversing some of its losses from the previous session. It was eyeing a monthly gain of three per cent, helped by a weak yen and a rally in technology stocks.

S&P 500 futures and Nasdaq futures both ticked higher, rising 0.18 per cent and 0.3 per cent, respectively.

In currencies, the yen continued to languish near a 38-year low on the weaker side of 160 per dollar, leaving markets on alert for any intervention from Japanese authorities to prop up the currency.

The yen was last marginally higher at 160.68 per dollar, but was set to lose more than two per cent for the month, as it continues to be hammered by stark interest rate differentials between the US and Japan.

"Considering that the current pace of depreciation is slower than in April, there should be no reason why 160 has to be the line in the sand," said Vincent Chung, associate portfolio manager for T Rowe Price's diversified income bond strategy.

"Most expectations suggest that intervention would likely occur if there were a quick depreciation to 163."

Tokyo spent 9.79 trillion yen at the end of April and in early May to push the yen up five per cent from its then 34-year low of 160.245.

Data on Friday showed core consumer prices in Japan's capital rose 2.1 per cent in June from a year earlier, highlighting the challenge the Bank of Japan faces in timing its next interest rate hike, as cost pressures from the weak yen keep inflation above its two per cent target but also hurt consumption.

The euro was last 0.04 per cent higher at $1.0707, though it was headed for a 1.3 per cent monthly decline as the common currency continues to be weighed by political turmoil in the bloc, with France's snap election due to kick off this weekend.

In commodity markets, gold has felt the burden of a firm dollar and fell 0.14 per cent to $2,324.12 an ounce.

Brent crude oil futures rose 0.24 per cent to $86.60 a barrel, while US West Texas Intermediate crude futures gained 0.29 per cent to $81.97 per barrel.