By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

As the dust settles on a remarkable 24 hours of central bank activity, investors in Asia round off the last full trading week of the year hoping for some respite from the global market selloff sparked by the Fed's 'hawkish cut' on Wednesday.

These nerves were partially soothed on Thursday by the Bank of England's surprisingly 'dovish hold' and the Bank of Japan's seeming ambivalence toward raising rates in January.

Some of Wednesday's moves reversed on Thursday – volatility cooled, a bit of the froth in implied U.S. rates came off, and FX intervention from several emerging market central banks helped support EM currencies. Brazil's real bounced off a record low and South Korea's won from a 15-year low.

But the genie of a 'higher for longer' Fed is out of the bottle. Wall Street failed to rebound, the dollar hit another two-year high, lifted by its gains against the Japanese yen, and Treasury yields leaped again. The 10-year yield nudged 4.60%, its highest since April and up almost 100 basis points since the Fed's easing cycle began in September.

Soaring U.S. yields and a booming dollar – and add to that now a notable correction in emerging equities – have tightened EM financial conditions significantly. They are now the tightest since April, according to Goldman Sachs.

The heavy selling pressure on EM assets is unlikely to lift much as long as the U.S. dollar and yields stay high, and the threat of large tariffs from the incoming Donald Trump administration in Washington looms large.

Analysts at JP Morgan estimate that net capital outflows from EM countries in October totaled $105 billion – $75 billion out of China alone – marking the worst month since June 2022. November and December have continued to post outflows too, albeit more modest.

"We do not rule out more outflows in 1Q24 should the dollar continue to strengthen and/or sentiment sour. Central to the outlook will be how residents react. October's data suggest that residents could also be sending their flows elsewhere," JP Morgan's Katherine Marney wrote this week.

Friday's calendar in Asia is busy, with Japanese inflation and an interest rate decision in China grabbing the spotlight.

BOJ Governor Kazuo Ueda said on Thursday that underlying inflation in Japan remains moderate. But the yen's persistent weakness could soon shift that dial. Economists expect November's annual core inflation rate to have risen to 2.6% from 2.3% in October.

Meanwhile, the People's Bank of China is expected to leave its benchmark one- and five-year lending rates on hold at 3.10% and 3.60%, respectively.

Beijing has pledged to take a range of fiscal and monetary steps next year to stimulate economic activity, fight off deflation, and support markets.

Here are key developments that could provide more direction to markets on Friday:

• China interest rate decision
• Japan CPI inflation (November)
• Malaysia CPI inflation (November)