(Bloomberg) — Asian equities slipped as traders considered the sustainability of a tech-driven rally that’s pushed a key benchmark to a near two-year high. The offshore yuan weakened to the lowest this year.

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Japanese and Chinese stocks led the weakness in regional equities. The MSCI Asia Pacific Index fell as much as 0.4% after Wednesday’s 1% gain, when renewed optimism over artificial intelligence lifted most markets. Technology stocks in the region suffered, with the Hang Seng Tech Index dropping more than 1%. S&P 500 futures edged higher.

The People’s Bank of China set the yuan’s daily reference rate at its weakest since November in a sign policymakers are loosening their grip on the currency. The Japanese yen swung between gains and losses following a five-session drop, which saw it close above 158 against the dollar. A Bloomberg index of dollar strength was little changed.

Asian stocks are taking a breather and “need an adrenalin shot of another night of record highs on Wall Street,” said Tony Sycamore, market analyst at IG Australia. More crucially, Japanese traders are likely “scared about another round of currency intervention which will send USD/JPY lower and with it the Nikkei.”

US Treasury and Australian bond yields edged higher, following a rise in their European peers. There was no trading of Treasuries Wednesday due to a US holiday.

Futures contracts on China’s 10-year notes rose to a record high. The bonds were in focus after PBOC Governor Pan Gongsheng gave the clearest indication yet that the central bank would start trading government bonds on the secondary market. Ten-year government bond futures closed at a record high on Wednesday.

The New Zealand government bond yields advanced after the nation’s economy exited a recession with modest expansion in the first quarter. Gross domestic product gained 0.2% from the previous quarter, beating economist estimates of 0.1% growth.

“Although the data can be volatile, markets are reading it as lessening the odds of early rate cuts,” said David Croy, a strategist at Australia & New Zealand Banking Group in Wellington.

Despite Thursday’s tepid moves, MSCI’s gauge of Asian stocks is trading near its highest since March 2022. Wall Street, meanwhile, has been lifted by the continued AI frenzy and resilient economic growth that should continue to support corporate earnings, especially in the technology sector.

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Questions are rising on what could derail the stock rally given “all is not so rosy under the hood, where index market breadth has been poor, with participation underwhelming, suggesting the rally has been built on a shaky foundation,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “It has simply been a tough trade to bet against AI in its various guises – so until we lose these behemoths then pullbacks at an index level will likely be shallow and well-supported.”

In corporate news, shares of Guzman y Gomez Ltd., a Mexican-themed fast-food chain, jumped as much as 38% in its trading debut in Australia following the country’s largest initial public offering in almost a year.

In commodities, oil lost ground ahead of the release of weekly inventory data from the US that may show another rise in nationwide crude inventories. Gold edged higher after closing the previous session little changed.

Key events this week:

• Eurozone consumer confidence, Thursday

• UK BOE rate decision, Thursday

• US housing starts, initial jobless claims, Thursday

• Eurozone S&P Global Manufacturing PMI, S&P Global Services PMI, Friday

• US existing home sales, Conf. Board leading index, Friday

• Fed’s Thomas Barkin speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 1:18 p.m. Tokyo time

• Nasdaq 100 futures rose 0.5%

• Japan’s Topix fell 0.5%

• Australia’s S&P/ASX 200 fell 0.2%

• Hong Kong’s Hang Seng fell 0.5%

• The Shanghai Composite fell 0.3%

• Euro Stoxx 50 futures rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0743

• The Japanese yen was little changed at 158.11 per dollar

• The offshore yuan was little changed at 7.2836 per dollar

Cryptocurrencies

• Bitcoin rose 0.4% to $65,101.78

• Ether was little changed at $3,548.74

Bonds

Commodities

• West Texas Intermediate crude fell 0.2% to $81.37 a barrel

• Spot gold rose 0.3% to $2,334.86 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess.

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