AI Momentum Sweeps Asia: Regional Stocks Rally Amid Currency Shifts and Policy Divergence

The Asian equity landscape strengthened on Monday as technology and semiconductor sectors rode the coattails of last week’s artificial intelligence-driven surge on Wall Street. Japan’s Nikkei 225 led regional gains with a 1.8% climb to 50,402.39, propelled by semiconductor heavyweights Tokyo Electron (up 6.3%) and Advantest (gaining 4.5%) capitalizing on the tech boom. However, the impressive equity performance contrasted sharply with currency headwinds: the Japanese yen weakened further to approximately 157.40 per dollar, even following the Bank of Japan’s Friday rate hike—its most aggressive move in thirty years. This divergence highlighted a critical market dynamic: while export-focused tech firms benefited from lower currency valuations, policymakers grew increasingly concerned about excessive volatility. Japanese finance officials issued warnings about unchecked yen depreciation, with Atsushi Mimura noting that “regulators will act to curb any excessive fluctuations.”

For regional currency traders monitoring exchange rates like the 90,000 yen conversion rates against other regional currencies including the Australian dollar, the backdrop of policy uncertainty underscored broader Asian market complexity. Beyond Japan’s currency turbulence, equity markets displayed mixed signals. Hong Kong’s Hang Seng inched up just 0.1%, while the Shanghai Composite gained 0.7% following the People’s Bank of China’s decision to keep benchmark loan prime rates steady. South Korea’s market showed stronger conviction, with the Kospi surging 2.1%, Taiwan’s Taiex advancing 1.6%, and Australia’s S&P/ASX 200 posting a 0.9% gain.

Stephen Innes of SPI Asset Management encapsulated the market sentiment: “Asian equity markets are stepping onto the floor with a constructive bias, taking their cue from Friday’s solid rebound in U.S. stocks and the growing belief that the final stretch of the year still belongs to the bulls.” U.S. futures similarly pointed upward, building on Friday’s performance where the S&P 500 rose 0.9%, with technology giants Nvidia (surging 3.9%) and Broadcom (gaining 3.2%) driving much of the enthusiasm. The Nasdaq composite appreciated 1.3%, while Oracle jumped 6.6% following its announcement of a U.S. joint venture for TikTok in partnership with Silver Lake and MGX, each acquiring 15% stakes.

Not all segments shared in the optimism. Homebuilders stumbled as sales data revealed cooling momentum in the housing sector, with KB Home tumbling 8.5%. Consumer sentiment showed marginal improvement in December but remained substantially depressed compared to year-ago levels, weighed down by stubborn inflation, labor market softening, and escalating trade tensions. The Federal Reserve maintained its cautious stance despite December’s rate cut, with inflation persisting above its 2% target—a positioning that prompted market consensus expecting the central bank to hold steady at January’s policy meeting.

In commodity markets, energy prices strengthened: U.S. crude climbed 1.2% to $57.20 per barrel while Brent crude reached $61.17. The euro remained relatively anchored against the dollar, reflecting the complex cross-currents shaping global financial flows as year-end approaches.