Asian stocks rose on Thursday as investors continued to switch into riskier assets amid growing confidence the global economy is recovering, keeping the dollar on the defensive.
After hitting its weakest value in almost a year on Wednesday against a basket of currencies <.DXY>, the greenback was holding just above that level on Thursday, reflecting the shift out of less risky assets.
Oil prices garned some support to rise above $72 a barrel from the weak dollar and firm equity markets but also from OPEC's agreement to maintain output levels.
Major European stock futures and U.S. equity futures were up 0.5 percent, implying firmer opens.
European Central Bank Governing Council member Erkki Liikanen reinforced market sentiment that the world economy is improving, saying the euro zone economy had bottomed out.
South Korea signaled it could be one of the first countries in the world to raise interest rates if house prices jump much more. That knocked front-end Korean treasury bonds the most in three months.
The final decision on when and how much to adjust its policy depends on each country's situation, Korean central bank governor Lee Seong-tae said, adding that G20 finance ministers' pledge last weekend to maintain growth-supporting policies was aimed mainly at soothing markets.
South Korean shares were swept higher though by broader themes, rising 2.3 percent as Asian equities benefited from rising risk appetite.
Feeding into the recovery idea, shipping and shipbuilding companies Hanjin Shipping <000700.KS> and Hyundai Heavy Industries <009540.KS> surged 8.8 percent and 4.6 percent respectively after a rise in the Baltic Dry Index <.BADI>, a key freight indicator.
Japan's Nikkei index <.N225> gained 2 percent even though machinery orders' data pointed to weak capital spending in the world's No. 2 economy.
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> was up 1.5 percent by mid-afternoon.
In Australia, a sharp fall in employment in August put pressure on the Aussie dollar and dampened expectations for a rate rise this year.
But share prices gained 1 percent with energy stocks Woodside Petroleum
Spot gold held firm at $995.70 per ounce by 0616 GMT, after topping $1,000 on Wednesday.
New Zealand kept interest rates at a record low 2.5 percent but indicated it was less inclined to cut again.
However, the kiwi dollar fell after Governor Alan Bollard told Reuters that the currency, which hit a one-year high on Wednesday, was overvalued and that markets were premature in pricing in higher rates from early 2010.
Our view at the moment is that we expect the official cash rate to be on hold until the latter part of 2010, Bollard said.
China's Shanghai index <.SSEC> recovered early losses and turned slightly positive but a top planning official said economic conditions were not ripe enough yet for China to exit its proactive fiscal policy soon.
Recent volatility in China's shares has made fund managers cautious about buying, a Reuters poll shows.
Hong Kong's Hang Seng Index <.HSI> leapt to a one-year intraday high while Taiwan's benchmark TAIEX index <.TWII> hit a 14-month closing peak after the government named a new cabinet, raising hopes a financial services agreement with China can be signed soon.
NYMEX crude rallied for a fourth day running. A U.S. report on Wednesday showed crude stocks falling much greater than expected and markets were soothed by OPEC news.
(Additional reporting by Gyles Beckford in Wellington and Seo Eun-kyung in Seoul; Editing by Neil Fullick)