Stocks in Asia hit a 2-month high, with the dollar defensive on the Fed view. On Tuesday, Asian shares rose to record two-month highs, drawing cues from a rally on Wall Street. At the same time, the dollar lingered near its lowest level in over two and a half months on the view that the Federal Reserve of the United States is likely done with interest rate hikes.

The MSCI broadest index of Asia-Pacific equities outside of Japan (.MIAPJ0000PUS) rose by 0.97% to 510.11 after reaching 511.05, the highest level since September 18. The index is currently up over seven percent for the month and is on track to post its most significant monthly increase since January.

Eurostoxx 50 futures are up 0.18%, German DAX futures are up 0.14%, and FTSE futures are up 0.01%. This suggests that the risk surge in European stock markets will continue despite the absence of significant economic events on the European calendar.

In addition to earnings from Nvidia (NVDA.O), which set a record high on Monday, the minutes from the most recent meeting of the Federal Reserve will dominate investors’ attention on Tuesday as they try to determine the direction in which interest rates are moving.

Wall Street’s three major stock averages increased on Monday, with the 1% surge on the Nasdaq leading the drive. This came as heavyweight Microsoft (MSFT.O) hit a record high after it hired Sam Altman, the head of OpenAI, until he was removed late last week.

The general trend for the stock markets in November has rebounded as a flurry of data showing U.S. inflation might be dropping has fueled wagers that the Federal Reserve is done with monetary tightening and rate cuts may be coming the following year.

According to the CME Group’s FedWatch tool, traders have virtually fully priced in the possibility that the Fed will keep interest rates constant in December, and some have begun pricing in rate cuts as soon as March. Traders have also begun pricing in rate cuts as early as March.

Some people continue to be wary because new economic data might alter the outlook for monetary policy.

According to Ben Bennett, an investment analyst for Legal and General Investment Management based in the Asia Pacific region, “all it takes is another strong inflation print or more strength in the consumer and labor market for rates to head higher again.”

“My main concern is … that we’ll see some disappointing data around the turn of the year, which will focus attention on the risk of recession.”

A lack of significant economic data releases throughout the week is one factor that is likely to keep investors on the sidelines for the majority of the trading session this week.

There is also the danger that the last mile of getting inflation back to target may need a significant increase in the unemployment rate in 2024, which can translate into more support for the dollar, according to Nicholas Chia, an Asia macro analyst at Standard Chartered.

“Especially if recession fears grow, accompanied by murmurs of more tightening by the Fed.”

The rest of Asia saw gains, with Japan’s Nikkei (.N225) leading the way, as it continued to trade near the 33-year high it reached on Monday. The index is up almost 28% this year, making it the stock market with the best performance in Asia.

Reports of Beijing’s most recent stimulus package for the property industry raised investors’ appetite for risk, which led to an increase in the value of the blue-chip CSI300 Index (.CSI300) in China and a gain of 0.78% for the Hang Seng Index (.HSI) in Hong Kong.

Treasury yields went lower due to solid demand for 20-year Treasury notes that were put up for sale on Monday for a total of $16 billion. This indicated that the market continues to predict that inflation will slow down and that the Federal Reserve will decrease interest rates in the coming year.

The yield on 10-year Treasury notes fell to 4.393%, while the yield on 30-year Treasury bonds fell to 4.533%. Both of these figures represent decreases in yield relative to their respective benchmarks.

Lower yields left the dollar on the back foot, with the dollar index measuring the U.S. currency against a basket of six major currencies, falling 0.135% to 103.31 after touching a near three-month low of 103.17 earlier in the session. The dollar index measures the U.S. currency against a basket of six major currencies.

The Japanese yen gained 0.22% against the dollar, moving away from the one-year low of 151.92 it reached just last week. The current exchange rate for the dollar is 148.03.

During the initial part of today’s trading session, the Australian dollar reached a three-month high of $0.65775, typically considered a barometer of appetite for risk.

Two weeks after officials hiked interest rates to a 12-year high earlier to manage high prices, the governor of Australia’s central bank said on Tuesday that inflation will continue to be a significant challenge over the coming one to two years. His comments were made after policymakers lifted interest rates to a new high.

The oil price went down, undoing the gain made the previous day. The price of a barrel of crude oil in the United States decreased by 0.46%, reaching $77.47, while a barrel of Brent crude fell to $81.94 on the day.