Asian Stocks Narrow Losses After Dollar Weakens and Oil Prices Drop

Asian equities pared losses on Friday as the U.S. dollar declined and crude oil prices fell, easing inflationary pressures and boosting sentiment. The S&P 500 ended near flat, while volatility remained elevated.

Asian stock markets reversed early losses amid a broad-based retreat in the U.S. dollar and a drop in crude oil futures. The U.S. dollar index sank 0.7% to 104.35, with the euro and yen gaining ground, supporting regional equities. Crude oil futures, tracked by CL=F, fell 2.3% to $78.40 per barrel, marking the second consecutive daily decline and reducing concerns about energy-driven inflation. The S&P 500 closed flat at 5,315.41, while the CBOE Volatility Index (^VIX) settled at 17.8, down from Thursday’s 18.5, indicating a slight reduction in market anxiety. Energy and materials sectors, which had been under pressure earlier in the week due to elevated oil prices, saw modest gains as commodity risk premiums declined. The STOXX Europe 600 energy index rose 1.2%, reflecting improved sentiment in global commodity markets. Market participants attributed the shift to a combination of monetary policy reassessment and weakening demand signals. The Federal Reserve’s dovish stance at the March FOMC meeting, coupled with softer-than-expected U.S. manufacturing data, bolstered expectations of a potential rate pause in Q2 2026. This environment favored risk assets, particularly in cyclical sectors linked to commodity input costs. The recovery in Asian equities was uneven, with Japan’s Nikkei 225 gaining 0.9% and Hong Kong’s Hang Seng rising 0.6%. However, China’s CSI 300 edged up just 0.2%, reflecting persistent concerns over property sector stress and weak consumer demand. Overall, the day’s move was reactive rather than trend-setting, with traders maintaining cautious positioning ahead of upcoming inflation and employment reports.