Asian stocks set for weekly gain on fading US rate hike wagers

Shares across Asia gained on Friday, heading for their best week in two months after benign US inflation figures eased bets on a Fed rate increase. Brent crude steadied at $87.03 a barrel and was set for a 4 per cent weekly rise, snapping a two-week losing run. Stalled talks to end the Middle East war could keep risk appetite in check.

MSCI's Asia-Pacific index excluding Japan rose 0.28 per cent, on track for a 2.7 per cent weekly gain. Japan's Nikkei gained 1.5 per cent and was set for a weekly rise of over 5 per cent. Traders now put the chance of a Fed hike next month at 35 per cent, down from 55 per cent a week earlier, according to CME FedWatch. Gold fell 0.8 per cent to $4,313 an ounce after climbing to a high last seen in early June.

The yen traded at 159.40 per dollar, just below the 160 mark, a level traders see as a possible trigger for fresh buying from Tokyo. A joint intervention with the US in late July failed to steady the yen. Traders are pricing in a Bank of Japan rate hike next month, but a September meeting could disappoint if the bank seems insufficiently hawkish. Padhraic Garvey of ING blamed the yen's weakness on a cautious central bank and low interest rates.