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Stocks in Asia dropped alongside US equity futures with expectations of steeper US rate hikes growing after comments by two Federal Reserve officials. The dollar rallied.

An Asian stock benchmark was set for a third straight weekly slide, the worst such run of losses since October.

Contracts for both the S&P 500 and Nasdaq 100 were down after the underlying indexes sank more than 1 percent last Thursday.

The Bloomberg dollar gauge rose as much as 0,4 percent, erasing its losses for the year, while benchmark Treasury yields climbed for a fourth day.

Yields on two-year and 10-year Treasuries both set 2023 highs this week. Data on Thursday showed that US producer prices rebounded in January by the most since June.

Federal Reserve Bank of Cleveland President Loretta Mester said she had seen a “compelling economic case” for rolling out another 50 basis-point hike, and St. Louis President James Bullard said he would not rule out supporting a half-percentage-point increase at the March meeting. While Mester and Bullard participate in deliberations, they do not vote on monetary policy decisions this year.

The market has been “a little bit too sanguine” so far this year concerning any imminent Fed pivot, according to Helen Zhu, chief investment officer at Hong Kong-based Nan Fung Trinity.

“We don’t necessarily think there’s going to be a 50-basis-point rate hike at this next Fed meeting, but we do think that the expectations for a lot of cuts in the second half of this year are probably overdone,” Zhu said on Bloomberg Television.

Investors have been upping their bets on how far the Fed will raise rates this tightening cycle.

They now see the federal funds rate climbing past 5,2 percent in July, according to trading in the US money markets. That compares with a perceived peak rate of 4,9 percent just two weeks ago.

Australian bond yields rose, following the moves in Treasuries, and as the nation’s central bank chief spoke in parliament. – Bloomberg