• The dollar slumped against the yen and gold reached an all-time high due to speculation of a Federal Reserve interest rate cut.
• The yen strengthened after hawkish comments from Bank of Japan officials, while the euro rose following ECB President Christine Lagarde's statement.
• Gold hit a record high of $2,567.93, buoyed by the dollar's weakness and economic uncertainty.
• Asian shares rose, oil prices surged, and the global financial market is closely watching the Federal Reserve's decision on September.

The global financial market experienced a significant shift on Friday as the dollar slumped against the yen and gold reached an all-time high. This shift was primarily driven by investors increasing their bets on a substantial Federal Reserve interest rate cut in the upcoming week. Media reports suggesting that the decision was challenging for officials further fueled this speculation.

The anticipation of a 50-basis point U.S. rate cut on September 18 has been a hot topic in the financial world. According to LSEG data at 0155 GMT, traders raised their bets back to 41% from about 28% before articles in the Financial Times and Wall Street Journal each called the decision a close call. This shift in sentiment has added another layer of complexity to the ongoing debate about the Fed rate cut.

Tony Sycamore, an analyst at IG, noted the tug-of-war being played out in bond futures and the dollar-yen rate in particular. Everybody thought we were back on track for 25 basis points, and now 50 is suddenly back on the table, he said.

Yen Strengthens, Euro Rises, and Gold Hits Record High

The dollar dropped 0.41% to 141.225 yen, heading back towards Wednesday's low at 140.71, the weakest level this year. The yen also received support this week from hawkish comments from Bank of Japan officials. Policy board member Naoki Tamura expressed his concern on Thursday, saying he was worried that upside inflation risk was heightening. This statement, coupled with the speculation around the Fed rate cut, led to a one-week trough in the dollar index, which measures the currency against the yen and five other major rivals, dropping to 101.03.

In Europe, the euro added 0.09% to $1.1084, building on Thursday's 0.57% advance. This came after European Central Bank President Christine Lagarde pushed back on prospects of a rate cut in October, following a widely expected quarter-point reduction on Thursday. This statement by Lagarde led to a strengthening of the euro against the dollar.

Meanwhile, gold extended Thursday's 1.9% climb to reach a fresh record high of $2,567.93, buoyed by the dollar's weakness. The precious metal has traditionally been seen as a safe haven during times of economic uncertainty, and the current speculation around the Fed rate cut has only increased its appeal.

Asian Shares Rise, Oil Prices Surge

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rallied 0.53%. Hong Kong's Hang Seng led advances in regional markets, gaining 1.13%. Mainland Chinese blue chips added 0.24%, Australia's benchmark climbed 0.31%, while South Korea's Kospi was flat. However, Japanese stocks underperformed, dragged lower by the stronger yen, with the Nikkei losing 0.48%.

The upcoming long weekends in Japan, mainland China, and South Korea are also expected to impact the markets. Tokyo will be back on Tuesday, China on Wednesday, and South Korea not until Thursday. U.S. stock futures were flat following gains on Thursday for the cash indexes.

In the energy sector, crude oil continued to climb after surging around 2% overnight. Producers are assessing the impact on output after Hurricane Francine tore through the Gulf of Mexico. U.S. West Texas Intermediate crude futures rose 0.54% to $69.34 per barrel, building on Thursday's 2.5% rally. Brent crude futures added 0.47% to $72.31, after a 1.9% jump in the previous session.

The global financial market is in a state of flux, with investors closely watching the Federal Reserve's decision on September 18. The outcome of this decision could have far-reaching implications for the dollar, gold, and global stock markets.

The current situation is unique due to the added layer of uncertainty brought about by the COVID-19 pandemic and its impact on the global economy. As the world awaits the Federal Reserve's decision, the market continues to react and adjust to these unprecedented circumstances.