Asian stocks fell to their lowest in a week on Friday, while the dollar was steady as elevated Treasury yields weighed on sentiment after hawkish comments from US Fed Chair Jerome Powell dashed expectations of a peak in interest rates. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1% to a one-week low of 486.39, on track for a fourth session of losses and a weekly decline of 0.5%. The sombre mood is set to continue as Europe wakes up, with futures indicating a steeply lower open. Eurostoxx 50 futures were down 0.73%, German DAX futures dropped 0.66% and FTSE futures were 0.78% lower. US Federal Reserve officials including Powell said on Thursday they are still not sure interest rates are high enough to finish the battle with inflation. The Fed is “committed to … monetary policy that is sufficiently restrictive to bring inflation down to 2% over time,” Powell said at an International Monetary Fund event. “We are not confident that we have achieved such a stance.” Powell’s comments along with a weak auction of $24 billion in 30-year Treasuries pushed yields higher, casting a shadow on equities and providing support to the dollar. “There is no point in corralling the market into expecting cuts until shortly before they look necessary,” said Rob Carnell, Asia-Pacific head of research at ING. Investors have been looking for signs of US interest rates peaking after the Fed held rates steady last week, a move that bolstered speculation that the rate hiking cycle was over, leading to a short-lived rally in risky assets. Some investors said Powell’s hawkish leaning on Thursday may have been the result of a recent loosening of financial conditions that has come as yields have tumbled in recent weeks. ING’s Carnell said the Fed needs to keep rates and bond yields reasonably high to achieve the tighter financial conditions that will bring about lower inflation and enable the Fed to ultimately cut rates. “That rhetoric has to continue, ‘we’re not definitely finished, there’s still a chance of more’ … (you) do that right up until the day before you cut,” he said.