The dollar was on the cusp on Thursday of its highest value in two decades while stocks gained on corporate earnings, with the yen tumbling to its lowest since 2002 after the Bank of Japan doubled down on its ultra loose monetary policy.
The yen dropped to a 20-year low and breached the 130 per dollar level after the Bank of Japan vowed to buy unlimited amounts of 10-year bonds daily to defend its yield target. The yen was last at 130.28 per dollar.
The fall of the Japanese currency buoyed the dollar index to as high as high as 103.70, its strongest in five years. A further push above 103.82 would see it test levels not seen since late 2002.
The BOJ's move was in stark contrast with investors' conviction that US interest rates are about to start going up fast and it jolted the dollar higher across Asia and against majors.
"The Bank of Japan has pretty much given a green light to clobber the yen - every other central bank is worried about inflation, talking about tightening monetary policy," said Michael Hewson, chief markets analyst at CMC Markets.
The stronger dollar would likely weigh on emerging markets, and also drag on the US economy, analysts said.
Meanwhile, European stocks gained on solid corporate earnings, with the broad Euro STOXX 600 gaining 0.8 per cent. Indexes in Frankfurt and Paris added 0.9 per cent and 1.1 per cent respectively.
UK bank Standard Chartered jumped 10.1 per cent after upbeat quarterly earnings. Its Hong Kong-listed shares had earlier gained more than 12 per cent.
Wall Street was set for gains, too.
Nasdaq and S&P futures were up 2.0 per cent and 1.4 per cent respectively after Facebook owner Meta beat Wall Street forecasts, sending its shares up almost 20 per cent after hours.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 per cent.
Japan's Nikkei rose 1.5 per cent and was heading for its best day in two weeks as investors cheered the weaker currency that helps Japanese exporters. Japanese government bonds had their best rally in a month.
"Markets were quite fearful at the start of the earnings season but Meta's earnings last night seems to have calmed sentiment," said Kaspar Hense, senior portfolio manager at Bluebay Asset Management in London.
"It looks like we have turned a corner for the outlook for US stocks and that should provide some relief to investors watching the dollar's rise."
Elsewhere in currencies, Europe's energy crisis has bruised the common currency, with the euro testing major support at $US1.0543 ($A1.4802).
The euro's drop to a five-year low is rekindling the possibility the currency will reach parity against the dollar for the first time in two decades, as fears of a euro zone recession encourage investors to pile on the bearish bets.
Looming over markets is uncertainty about the economic fallout of war in Ukraine, highlighted by Russia's halt on gas supply to Poland and Bulgaria on Wednesday, and lingering lockdowns in China which are sharply curbing activity.
Set against that backdrop is investors' conviction that US rates are rising and that next week's Federal Reserve meeting will bring the first of several consecutive 50-basis-point hikes.
Data on US growth, due later in the day, may temper those expectations a little if - as trade figures on Wednesday suggested - it is wavering, but a major focus is on consumers and whether they can keep company earnings ticking over even as rates go up.
An advance reading of first quarter US economic growth is expected to show an annualised 1.1 per cent growth, down sharply from 6.9 per cent in the 2021 fourth quarter. That would be the slowest since the recession triggered by the COVID-19 pandemic.
"Consumers are still, for now, taking higher prices in their stride," said Seng Wun Song, an economist at CIMB Private Bank in Singapore. "It's enough cheer for (stock) markets."Frespec