By Stella Qiu

SYDNEY (Reuters) - Asian shares were pinned near three-month lows on Friday as investors awaited key U.S. inflation data that could either ease or worsen concerns about price pressures, while the dollar towered at two-year peaks.

The closely watched inflation gauge - the U.S. Core Personal Consumption Expenditures - is due later in the day. Forecasts are centred on a monthly rise of 0.2% for November, and any upward surprises there could lead markets to further scale back bets for U.S. policy easing next year.

Futures imply just 37 basis points of rate cuts from the Federal Reserve in 2025, less than two cuts, after the U.S. central bank turned hawkish at its last meeting of the year. A rate cut is not fully priced in until June.

Rates now are expected to bottom out at 3.9% by the end of next year, much higher than just a few months ago. That outlook took a heavy toll on the Treasury market, where the benchmark 10-year yields jumped 40 bps over the past two weeks to cross above a key level of 4.5% for the first time since May. [US/]

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4% on Friday and was headed for a weekly drop of 2.6%. It is, however, up over 8% for the year.

Japan's Nikkei rose 0.2% on Friday and is up a whopping 16% for the year, in part due to the weakness in the yen, which has depreciated 12% in 2024 and drew intervention warnings again from Japanese authorities.

Global central banks have now wrapped up an eventful year of rate decisions, with the UK, Japan, Norway and Australia holding firm, and Switzerland and Canada implementing cuts of 50 basis points at their last meeting of the year. Sweden's Riksbank reduced its policy rate by 25 bps, as did the European Central Bank last week.

"Taken together, it's clear how much central banks are worrying about geopolitics and uncertainty in 2025," said James Rossiter, head of global macro strategy, at TD Securities. "They've nimbly set themselves up for more fluid policymaking in 2025.

"Ultimately, uncertainty is going to remain high, policy shocks significant, and markets are going to twist and turn potentially more than in the recent past. 2025 is going to be a ride."

China's blue chips slipped 0.3% while Hong Kong's Hang Seng edged up 0.2%. The People's Bank of China left its benchmark lending rates unchanged on Friday, matching market expectations.

In the currency markets, the dollar stood tall at a two-year peak of 108.45 against its major peers, enjoying some interest rate advantage.

It held near a five-month high at 157.5 yen, having jumped 1.7% overnight as Bank of Japan held rates steady and Governor Kazuo Ueda struck a dovish tone by saying it would take some time to assess the wage outlook and the impact of Trump's policies.

Data on Friday showed Japan's core inflation accelerated in November, supporting the case of a near-term rate hike. Swaps are split on the chance of a BOJ move in January, with 53% priced in.

The euro is down 1.3% for the week at $1.0364, threatening a key support level of $1.0331. Sterling is set for weekly loss of 1% to $1.2489 and on the verge of breaking a key level of $1.2484.

Treasuries look set for a fourth straight year of losses, with the 10-year yields up a whopping 70 bps this year. They climbed 17 bps this week to 4.57%.

The commodities market has also taken a hit because of a strong U.S. dollar. Oil prices fell on Friday, with U.S. West Texas Intermediate (WTI) down 0.5% to $69.06 and 2.7% lower for the week.

Gold prices are set for a 1.9% fall this week to $2,598 per ounce.

(Reuters) - A gauge of manufacturing activity in the U.S. Mid-Atlantic region slid to the lowest in nearly two years in December, with new orders and shipments both contracting in an indication the factory sector remains in a slump.

The Federal Reserve Bank of Philadelphia said on Thursday that its monthly manufacturing index fell for a second straight month to negative 16.4 - the lowest since April 2023 - from negative 5.5 in November. The median forecast among economists polled by Reuters was for a reading of positive 3.0. Negative readings indicate a contraction in activity.

The report's new orders index tumbled to negative 4.3, the lowest since May, from plus 8.9 in November.

Factory managers continued to be optimistic about prospects in six months' time but their growth outlooks nonetheless softened from a three-year high in November.

The regional report from the Philly Fed suggests the factory sector, accounting for just over 10% of the economy, is continuing to struggle finding its footing in the wake of the Federal Reserve's interest rate hikes in 2022 and 2023. While the Fed has shifted to rate cuts in the last half of this year, it is not expected to ease that much further from here and market-based measures of borrowing costs remain notably higher than they were in early 2022 and continue to exert pressure on investment.

On Tuesday the Fed reported that manufacturing output in November rebounded less than expected from a month earlier and production declined 1.0% year-on-year.

Also clouding the outlook is President-elect Donald Trump's ambitions for hefty new tariffs on goods imported from abroad, which could trigger counter levies to be imposed on American exports by U.S. trading partners.

(This story has been corrected to remove the word 'unexpectedly,' in paragraph 2)

By Jihoon Lee and Yena Park

SEOUL (Reuters) -The South Korean won dropped to its weakest level in 15 years on Thursday, weighed down by risk-averse sentiment after the U.S. Federal Reserve's cautious stance on more interest rate cuts, as well as domestic political uncertainty.

The won was quoted at 1,448.9 per dollar in onshore trade as of 0518 GMT, after opening the session at 1,453.0 per dollar, 0.96% lower than the previous day and the weakest since March 16, 2009.

The U.S. central bank cut interest rates on Wednesday, as expected, but Federal Reserve Chair Jerome Powell said more reductions in borrowing costs now hinged on further progress in lowering stubbornly high inflation.

U.S. central bankers now project they will make just two quarter-percentage-point rate reductions next year, half a percentage point less than anticipated in September, with higher projections of inflation for the first year of the new Donald Trump administration.

The hawkish stance pushed up the dollar and added to downward pressure on the won, which had already been weighed down by domestic political turmoil after impeached President Yoon Suk Yeol's short-lived martial law attempt earlier this month.

Taking into account the negative economic impact of the Dec. 3 martial law order, the Bank of Korea flagged on Wednesday downside risks to its economic growth forecasts for this year and next year.

So far in December, the won has weakened 3.9% against the dollar, extending losses for a third consecutive month.

The won, down 11% year-to-date, is the worst performing emerging Asian currency of the year and is set to record its worst year since 2008.

Prior to market open on Thursday, South Korea's finance minister said the government and the central bank would swiftly and boldly deploy measures to stabilise financial markets if volatility was seen as excessive.

"It is suspected that authorities are defending the 1,450 figure, making it difficult to short the won around the level," one local currency trader said.

To help ease pressure on the currency, the country's Financial Services Commission asked local banks to flexibly manage foreign exchange transactions and loans.

The Bank of Korea expanded its foreign exchange swap line with the National Pension Service, a market stabilising tool absorbing dollar demand stemming from growing overseas investment by the world's third-largest pension fund.

In the stock market, the benchmark KOSPI dropped as much as 2.5%, as foreigners sold local shares.

Investing.com-- The Bank of Japan kept interest rates unchanged in a nearly unanimous decision on Thursday, as policymakers remained cautious over Japan’s economic outlook and the path of inflation.

The BOJ kept its benchmark short-term policy rate at 0.25%, in line with a Reuters poll. Eight of the BOJ’s nine rate-setting board members voted in favor of the decision.

BOJ member Naoki Tamura was the sole dissenter, calling for a 25 basis point hike on concerns over rising inflation. 

BOJ Governor Kazuo Ueda is now set to speak at 01:30 ET (06:30 GMT). 

The BOJ said it expects consumer price index inflation to pick up in 2025, amid a virtuous cycle of higher wages and increased private consumption. The effects of recent government subsidies to lower living costs are also expected to wane in the coming year. 

Markets were somewhat split over Thursday’s decision, with some analysts forecasting a 25 basis point hike amid recent signs of rising inflation in Japan. But economic activity in the country has softened this year, as strong private consumption was largely offset by dwindling business spending. 

Increased political uncertainty in Japan also likely drove Thursday’s hold, with the BOJ expected to face some resistance from the government towards raising interest rates further. 

Thursday’s hold comes after the BOJ hiked rates twice in 2024, bringing an end to nearly a decade of ultra-loose monetary policy. The move was driven chiefly by Japanese labor unions negotiating a bumper increase in wages- a trend that is expected to happen again in 2025. 

Analysts forecasting a December hold said the central bank was still likely to raise rates further in the coming months, with a hike coming as soon as January or March. Wage negotiations in spring will be a key point of focus for the central bank. 

SEOUL (Reuters) - South Korea's potential economic growth rate is estimated to have fallen to around 2% and is projected to fall further below 1% by the late 2040s due to a lack of innovation and inefficient resource allocation, the central bank said on Thursday.

The Bank of Korea (BOK) estimated in an analysis that the potential growth rate, the maximum growth an economy can achieve in a year without triggering inflationary pressure, was around 2% from 2024 to 2026.

The rate has been falling in trend, from the lower 5% range in the early 2000s to the mid-to-lower 3% range in the 2010s and to mid-2% levels by 2020, the BOK said, citing lack of innovation and inefficiency in resource allocation.

In the long-term, the rate is projected to fall to the mid-to-lower 1% range in the 2030s and to around 0.6% by the late 2040s, according to the report.

"But, the abovementioned result is not a given condition and can differ greatly depending on how we respond through structural reforms," the BOK said.

Major reforms that could boost the economy's potential growth include building an ecosystem for innovation, balanced developments between the capital area and other regions of the country, and work-life balance policies, the bank said.

Investing.com-- U.S. stock index futures steadied on Wednesday evening after a sharp fall on Wall Street as the Federal Reserve lowered interest rates as expected but indicated a slower pace of easing in 2025.

Federal Reserve officials lowered interest rates for the third time in a row on Wednesday but projected fewer cuts in 2025 amid sticky inflation and resilient economic growth.

S&P 500 Futures were largely unchanged at 5,941.0 points, while Nasdaq 100 Futures inched lower to 21,475.25 points by 19:18 ET (00:18 GMT). Dow Jones Futures were marginally higher at 42,827.0 points.

Fed officials project only two more cuts in 2025

The Fed cut interest rates by 25 basis points at the end of its two-day meeting on Wednesday, bringing down the borrowing rate to a range of 4.25%-4.50%.

Chair Jerome Powell emphasized that further reductions depend on progress in curbing persistent inflation, reflecting policymakers' adjustments to potential economic shifts under the incoming Donald Trump administration.

Policymakers now see the benchmark rate falling to 3.9% for next year, suggesting just two 25 bps rate cuts, compared with a prior forecast in September for four cuts.

The Federal Open Market Committee (FOMC) economic projections showed that inflation was still a long way from its 2% target, with the targeted metric expected to end this year at 2.4% and at 2.5% next year.

It also showed that policymakers now expect slightly higher economic growth and lower unemployment next year compared to their projections three months ago.

Wall St slumps with tech logging heavy losses

The prospect of interest rates remaining higher for longer than expected sent Wall Street indexes sharply lower on Wednesday, with heavy losses in the technology sector. Investors also locked-in recent profits in tech stocks, after they rallied sharply over the past week.

Market darling NVIDIA Corporation (NASDAQ:NVDA) fell more than 1%, sinking deeper into correction territory following a 10% plunge from its recent peak.

Tesla Inc (NASDAQ:TSLA) slumped more than 8%, and Intel Corporation (NASDAQ:INTC) lost nearly 6%, while Broadcom Inc (NASDAQ:AVGO) shares plunged 7% on Wednesday.

In the aftermarket trade, Micron Technology Inc (NASDAQ:MU) shares plunged nearly 16% after the company issued a revenue outlook that came in below analysts’ expectations.

The S&P 500 declined 3% to 5,872.16 points, while the NASDAQ Composite fell 3.6% to 19,380.87 points.

The Dow Jones Industrial Average fell 2.6% to 42,326.87 points, its 10th consecutive session of declines, marking its longest losing streak since 1974.

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -Futures on the federal funds rate, which measure the cost of unsecured overnight loans between banks, priced in on Wednesday that the Federal Reserve will hold the overnight benchmark rate steady in January, after it lowered rates by 25 basis points at the end of its two-day meeting.

Rate futures also factored in about 33 bps in cuts in 2025, down from 49 bps immediately after the Fed statement, LSEG calculations showed.

The Fed on Wednesday also released new estimates on rate forecasts, also known as the "dot plot", which called for two quarter-point rate cuts next year. That mirrored what the futures market has been showing over the last two weeks.

The central bank's rate-setting Federal Open Market Committee lowered the benchmark overnight interest rate to the 4.25%-4.50% range, as widely expected. The decision, however, was opposed by Cleveland Fed President Beth Hammack, who preferred to leave the policy rate unchanged.

The Fed noted that the unemployment rate "remains low" and inflation "remains somewhat elevated." Slower progress on inflation, which is not seen returning to the 2% target until 2027, translates into a slower pace of rate cuts and a marginally higher terminal rate of 3.1%, also to be hit in 2027, versus the prior rate of 2.9% seen as of September.

"The Summary of Economic Projections is markedly hawkish, with only two projected rate cuts for 2025, signaling deeper concerns over persistent or re-igniting inflation," said Dan Siluk, portfolio manager and head of global short duration & liquidity and Portfolio Manager at Janus Henderson Investors, in emailed comments.

"The Fed seems to have switched back to prioritizing inflation risks over unemployment, readying for a January skip and potentially an extended pause in 2025, if inflationary pressures persist and the economy remains robust."

LONDON (Reuters) -British inflation rose to its highest in eight months in November but an underlying measure of price growth watched closely by the Bank of England held steady, offering the central bank a little bit of relief.

Consumer prices rose by an annual 2.6% in November, up from an increase of 2.3% in October and moving further away from September's 1.7% rise - the first time in almost three and a half years that inflation fell below the BoE's 2% target.

The inflation rate was the highest since March and in line with economists' expectations in a Reuters poll.

The increase in the rate was broad-based but most prominent for transport - particularly petrol and car purchase costs - and was only partly offset by smaller rises in air fares and the cost of eating out.

"Another consecutive monthly rise in inflation, reaching its highest level since March, underscores the persistent price pressures within the UK economy," Martin Sartorius, principal economist at the Confederation of British Industry, said.

The BoE is worried about persistently strong wage growth while the new government's tax increase for employers is expected to filter through into higher prices after it is introduced in April.

Some economists have predicted headline consumer price inflation is likely to hit 3% in 2025.

The BoE - which is expected to keep interest rates on hold on Thursday after its December meeting - predicted consumer price inflation in November would be 2.4% when it published a set of projections six weeks ago.

BEIJING (Reuters) -Joblessness among the youth in Chinese cities eased for a third straight month in November after reaching its highest this year in August, official data showed on Wednesday.

The urban jobless rate for 16-to-24-year-olds, excluding students, fell to 16.1% from 17.1% in October, according to data from the National Bureau of Statistics.

The unemployment rate for 25-29-year-olds also dropped, falling slightly to 6.7% from 6.8%, while the jobless rate for 30-59-year-olds was unchanged at 3.8%.

The nationwide jobless rate was at 5% in November, according to data released by the statistics bureau on Monday.

China stopped reporting the data for youth joblessness for months after the unemployment rate for 16-24-year-olds hit a record 21.3% in June last year.

The National Bureau of Statistics resumed publishing the closely watched benchmark in December 2023 after changing the methodology to exclude students.

The jobless rate also does not account for job seekers who have given up on job searches, and does not assess the unemployment situation in rural China.

China's economic recovery has stuttered this year amid weak domestic demand and a prolonged property crisis, although some officials are expecting the economy to achieve its 2024 growth target of around 5%.

The government has announced a wave of stimulus measures to buttress the economy ahead of more external headwinds expected from a second Trump administration in the United States next year.

Chinese government advisers have also recommended that Beijing should maintain an economic growth target of around 5.0% for next year, pushing for stronger fiscal stimulus to mitigate the impact of expected Trump tariff hikes on the country's exports.

By Jihoon Lee

SEOUL (Reuters) - South Korean Foreign Minister Cho Tae-yul said on Wednesday that President Yoon Suk Yeol's short-lived bid to impose martial law had created some limitations communicating with the team of U.S. President-elect Donald Trump and undercut both sides' political momentum.

At a rare joint news conference for foreign media, Cho and Finance Minister Choi Sang-mok sought to reassure Seoul's allies and calm market jitters since the martial law attempt that shocked the nation and triggered the biggest political crisis in decades.

Cho said Seoul had built a network and communication channels with Trump's campaign that were "stronger than those of any other country", but the martial law order undermined "the political momentum" between the two sides.

"It is true that there have been some disruptions with communication over the past two weeks due to this situation," Cho said.