(Bloomberg) — Asian stocks rose in the third session and the yen strengthened to a three-week high as the prospect of impending interest rate cuts from the U.S. Federal Reserve boosted sentiment.

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Share prices in Australia and Hong Kong rose on Monday, benefiting from Fed Chairman Jerome Powell’s speech in Jackson Hole in which he said it was “time” to move toward monetary easing. The Fed’s dovish stance also strengthened the yen against the dollar as Asia-based funds increased their existing short positions on the greenback. Japanese stocks fell on the strength of the local currency, while contracts for U.S. equities remained stable.

The prospect of lower US borrowing costs is having an impact on financial markets. Global stocks are just below an all-time high, while the greenback is falling and investors are rushing to buy government bonds. The yield on 10-year US Treasuries fell one basis point to 3.79 percent on Monday.

“It should be more risk-on,” said Chamath De Silva, head of fixed income at Betashares Holdings in Sydney. “Powell has confirmed that we will enter an easing cycle shortly and that the battle against inflation is over. So I expect a slight rally across the board, both equities and bonds will do well.”

In addition to the Fed’s bets, safe-haven purchases in response to rising tensions in the Middle East were also a driver. Oil prices rose 0.7% as the region braced for an escalation of conflict following an Israeli attack on Hezbollah targets in southern Lebanon.

The Bloomberg Asia Dollar Index started the week by rising to its highest since January. The Korean won gained while the Singapore dollar rose to its strongest in nearly a decade as traders weighed the difference between the local monetary authority’s relatively tight monetary policy and that of the Fed.

Powell’s highly anticipated speech at Jackson Hole marks a turning point in the Fed’s two-year-long battle to contain inflation and means policymakers are likely to cut interest rates from their highest levels in more than two decades. While the world’s largest economy is showing signs of slowing – which warrants a turnaround – there are no signs of an outright contraction yet.

“In my view, the U.S. is heading for a soft landing,” and Asian exports are performing well, said Khoon Goh, head of Asia research at ANZ Group Holdings Ltd. “I think we will see a strong rally and recovery in Asian currencies over the course of this Fed easing cycle.”

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Elsewhere in Asia, the People’s Bank of China left the interest rate on its one-year policy loans, the medium-term credit facility, at 2.3 percent after cutting it by 20 basis points in July. The PBoC has signaled that it wants to scale back the role of the medium-term credit facility as a policy tool and give more prominence to the seven-day reverse repo rate.

The decision underscores Beijing’s cautious approach to supporting the economy, even as China reported a rare drop in bank lending amid weak demand. The PBoC has walked a fine line in recent months between stimulating growth and easing a bond-buying spree to limit financial risks.

Reflecting the weak economic development, the CSI 300 stock index recorded a decline of up to 0.5 percent on Monday.

According to state media, Chinese authorities have also begun stress testing financial institutions’ bond investments to ensure they can withstand any market volatility should the record-breaking rally reverse.

Meanwhile, gold prices stabilized near a record high after Powell confirmed expectations of rate cuts. The precious metal has risen more than 20% this year in a rapid rally, driven by Fed hopes, safe-haven demand due to geopolitical risks, and purchases by central banks and Asian consumers.

Important events this week:

• Industrial production in Singapore, Monday

• Durable goods in the US, Monday

• Chinese industrial profits, Tuesday

• Germany GDP, Tuesday

• Trading in Hong Kong, Tuesday

• Australia CPI, Wednesday,

• Nvidia Corp. results, Wednesday

• US GDP, initial jobless claims on Thursday

• Personal income, spending and PCE price data from the US, Friday

Some of the key market movements:

Shares

• S&P 500 futures remained little changed as of 12:32 p.m. Tokyo time

• Nikkei 225 futures (OSE) fell 1.1%

• Japan’s Topix fell 1%

• Australia’s S&P/ASX 200 rose 0.7%

• The Hang Seng in Hong Kong rose 1 percent

• The Shanghai Composite remained little changed

• Euro Stoxx 50 futures fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index remained little changed

• The euro was little changed at 1.1184 dollars

• The Japanese yen rose 0.3% to 143.99 per dollar

• The offshore yuan remained virtually unchanged at 7.1219 per dollar.

• The Australian dollar fell 0.2% to $0.6781

Cryptocurrencies

• Bitcoin fell 0.3% to $64,082.95

• Ether fell 1% to $2,742.94

Bonds

• The yield on 10-year government bonds fell one basis point to 3.79%.

• The yield on Japanese 10-year bonds fell by 2.5 basis points to 0.875 percent

• The yield on Australian 10-year bonds fell four basis points to 3.88 percent

Raw materials

This story was created with the assistance of Bloomberg Automation.

– With support from Georgina McKay.

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