Oil Prices Dip, Yen Wobbles Ahead of BOJ Rate Hike Decision

Asian stocks rose on Friday as investors navigated global policymakers' efforts to combat inflation. The rally was fueled by a dip in oil prices, which fell 1% to $103.77 per barrel due to hopes of alternative supply routes from the Middle East. Despite lingering concerns about strikes between Saudi Arabia and Yemen's Houthis, Brent crude futures declined.

The Federal Reserve's rate hike on Wednesday, along with the Bank of England's warning that it may need to increase rates if the Middle East war continues, contributed to the sentiment shift. The 10-year US Treasury yield steadied at 4.936%, having surpassed 5% earlier in the week.

Japan's Nikkei index rose 0.9%, while South Korea's KOSPI surged 2%. In contrast, the yen softened to 156.23 per US dollar ahead of the Bank of Japan's policy decision later in the day. Analysts expect a 25 basis point rate hike and a pledge to deliver more to combat inflation risks.

Chris Weston, head of research at Pepperstone, cautioned that if bond yields rise again, volatility could quickly return. Michael Wan, currency strategist at MUFG, noted that Governor Ueda's communication on the BOJ's path forward will be crucial in convincing markets of a faster pace of rate hikes.