Asian shares pushed up for a second day on Wednesday, climbing back near a 13-month peak, as gold's surge to record highs and the dollar's tumble boosted resource shares.
Gold trimmed some gains but hovered near the all-time high of $1,043.45, compounding the dollar's woes after the U.S. currency was hit the previous day by a report that major countries were looking for alternatives in oil trade settlement.
Oil prices rose 50 cents a barrel to $71.38, holding on to broad gains scored the previous day as commodities surged on hopes that global demand was picking up.
Australian miners and Japanese trading houses were among the big winners, with shares of Rio Tinto
Resources on the whole ... are leading the way on what seems to be the ever-weakening U.S. dollar, said David Barrett-Lennard, commodities dealer at CMC Markets.
Some investors also took heart from Australia's central bank lifting interest rates the previous day, the first of any Group of 20 nation to do so in a sign that the emergency measures put in place to stem the financial crisis are gradually being unwound.
The move fueled gains of more than 1 percent on Wall Street, underscoring for many that the global economy was on the mend. <.N>
However, analysts noted that Australia is a special case because its economy and banking system were mostly sheltered from the global crisis and has benefited from China's aggressive efforts to stockpile resources and kick start growth.
Central banks in the West are unlikely to raise rates for some time as the strength of their economic recoveries is far from certain.
Federal Reserve officials remain cautious about unwinding emergency measures. Kansas City Fed President Thomas Hoenig said late on Tuesday that the U.S. economy is clearly recovering but that it is too soon for the Fed to withdraw its massive support.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was up 1.1 percent, with the material sector the biggest gainer on the day. The Thomson Reuters index of regional shares <.TRXFLDAXPU> edged up 0.7 percent.
Japan's Nikkei average <.N225> gained 0.9 percent, with financials getting a boost from a rise in U.S. counterparts the previous day after Goldman Sachs upgraded the sector. The banking sector on the Tokyo Stock Exchange first sector rose 3.6 percent.
DOLLAR ON THE BACKFOOT
The dollar edged up slightly after getting hit the previous day by the combination of a surging Australian dollar, gold and commodities.
The dollar index, a gauge of its performance against six major currencies, drifted up 0.2 percent to 76.459 <.DXY> but is still near a 13-month low of 75.827 hit in September.
The dollar edged up 0.2 percent against the yen to 88.95 yen but has slid back near an eight-month low of 88.23 yen hit last month. Those levels are seen as painful to Japanese exporters by slashing the value of their overseas revenue.
Japanese Finance Minister Hirohisa Fujii told the Wall Street Journal that current yen levels were consistent with acceptable market activity and were not extremely abnormal, the latest signal Japan's new government is taking a more hands-off approach on currency policy.
Fujii and other officials have made remarks suggesting they could intervene to stem yen strength, though many market players believe such intervention is unlikely unless the yen's rise becomes more volatile.
The Australian dollar hovered near 14-month highs against the U.S. dollar in the wake of the rate increase on Tuesday, which sent the Aussie up nearly 1.4 percent.
Government bonds slipped on the gains in stocks and prospect of central bank rate hikes in some countries.
Korean bond futures slipped 3 ticks to 108.72 after Australia's rate hike was seen as paving the way for a move in South Korea where its central bank is worried about a rebounding property market.
(Additional reporting by Adrian Bathgate in Wellington)