Asian stocks rise, while the dollar falls as markets assess Fed risks

Most Asian equity markets rose on Friday, while the US dollar remained near its lowest level since May, as investors worried about the risks of a global recession as the Federal Reserve continued to raise interest rates.

After rebounding from four-month lows overnight, US Treasury yields remained elevated in Tokyo. Japanese government bond yields remained low two days after the Bank of Japan defied investor pressure to further loosen yield curve controls.

Japan's Nikkei gained 0.16 percent, while Australia's benchmark gained 0.09 percent, while South Korea's Kospi fell 0.24 percent.

Hong Kong's Hang Seng gained 0.75 percent, while mainland blue chips gained 0.32 percent.

Despite a 0.76 percent drop in the S&P 500 on Wall Street overnight, Asian markets showed some resilience. However, E-Mini futures showed a small rebound at the reopen, gaining 0.24 percent.

Concerns about further Fed tightening were heightened by strong employment data in the United States and new hawkish rhetoric from central bank officials.

Weekly unemployment claims were lower than expected, indicating a tight labour market.

Boston Fed President Susan Collins said the central bank would probably need to raise rates to "just above" 5 per cent, then hold them there, while Fed Vice Chair Lael Brainard said that despite the recent moderation in inflation, it remains high and "policy will need to be sufficiently restrictive for some time".

"Usually reliable Fed dove" Brainard's comments, in particular, are "compounding rate hike fears," according to Tony Sycamore, an analyst at IG.

"For her to come out and say we still need higher rates really fuels the idea that the Fed really wants to deliver on the 75 basis point rate hikes that it projected back in December."

"The labour market is just a little too hot," Sycamore added.

The market expects the policy rate to be just below 5% in June, implying another 50 basis points of tightening.

Meanwhile, the dollar index, which measures the greenback against six peers, including the euro and yen, was little changed at 102.10, holding close to a 7 1/2-month low of 101.51, reached on Wednesday.

The benchmark 10-year Treasury yield was around 3.4 per cent after bouncing off the lowest since mid-September at 3.321 per cent overnight.

Equivalent JGB yields were flat at 0.405 per cent, holding around that level since getting knocked back from above the BOJ's 0.5 per cent policy ceiling on Wednesday, when the central bank refrained from further tweaks to its yield curve controls.

Elsewhere, crude oil prices continued to rise. Brent futures for March delivery gained 48 cents, or 0.6 per cent, to $86.64 a barrel, while U.S. crude advanced 54 cents to $80.87 per barrel, a 0.7 per cent gain.