Asia's AI Bounce Meets Volatile Yen in Jumpy Markets

Strong US tech earnings from Microsoft and Amazon helped revive Asia's stock rebound, lifting AI trades and pushing US stock futures higher. This momentum spilled over into Asia, with Japan's Nikkei jumping about 5% and a broad Asia-Pacific index (excluding Japan) gaining around 3%.

However, the rally was short-lived as currency traders remained cautious due to suspected government support for the yen ahead of the Bank of Japan's policy decision. The USD/JPY rate sat near 160.51 after being volatile in the previous day, with Reuters linking the move to Japan's suspected FX intervention and reports of dollar selling elsewhere in the region.

The sudden movement in the yen has made it a key risk factor for markets, with investors treating Japan and parts of Asia like a volatility trade. A sharp jump in the yen can impact exporters' earnings expectations and unwind popular 'carry' positions, making AI- and tech-heavy trades in the region more stop-start.