AI Sentiment: Cautiously bearish
Reason: Asian markets are cautious due to the potential rise in bond yields and tightening of US monetary policies, which could pose challenges to economic recovery.



Asian markets were cautious in trading this week as investors weighed the outlook of the US Federal Reserve's (Fed) rate hike and a potential increase in bond yields. This comes amid the Fed's indication of a faster-than-expected interest rate increase. Given the Fed's recent hawkish stance, the focus is now on the central bank's policy meeting minutes due next week, which may provide further clarity about future interest rates and strategies.

The US dollar held firm near its 11-month peak in Asia on Tuesday, reflecting the anticipated tightening of US monetary policy. The Japanese yen, on the other hand, remained at its weakest level since 2015 against the dollar, while the Australian dollar was flat. The euro was also under pressure due to the divergence in monetary policies between the US and Europe.

Asian equities showed a mixed reaction. Japan's Nikkei retreated from earlier gains due to a stronger yen, while Australian shares were modestly higher. Chinese and South Korean shares were slightly down, reflecting concerns about the Fed's monetary tightening.

Furthermore, the US Treasury yields were steady, with the 10-year yield standing near its highest since 2019. This follows the Fed's indication about the possibility of larger rate hikes to combat inflation. The rise in bond yields could lead to higher borrowing costs, posing a risk to economic recovery.

On the commodity front, oil prices remained steady due to geopolitical tensions in Eastern Europe and the Middle East, disrupting global supply. Gold prices slipped, influenced by the stronger dollar and expectations of higher interest rates.

In summary, the Asian markets are closely monitoring the US Fed's policy direction, which could significantly impact global financial markets. The potential rise in bond yields and the tightening of monetary policies could pose challenges to economic recovery.