Asian shares hit their highest level in 11 weeks on Thursday on hopes the U.S. economic downturn may be easing, while the dollar recovered after its latest wobble about its status as the main reserve currency.
The dollar fell against major currencies on Wednesday after U.S. Treasury Secretary Tim Geithner suggested he was open to expanding the use of the International Monetary Fund's special drawing rights, appearing to endorse an idea put forward by China.
Regional bonds were hit by stock market gains, while U.S. Treasuries steadied after falling on Wednesday on concerns that a planned surge in government debt supply to fund stimulus plans would struggle to find sufficient demand.
Stock markets preferred to focus on unexpectedly strong U.S. housing and durable goods data as a sign that the world's biggest economy may be over the worst, which fueled a late rally on Wall Street and provided a cue for Asia.
The main factor holding the market up is increased optimism regarding an economic recovery later this year, said Shane Oliver, head of investment strategy at AMP Capital Investors on the stock market rally.
It remains to be seen whether we have seen the bottom or not, but the rally we've been seeing in the last few weeks probably still has a bit further to go, he added.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> gained for a fourth consecutive session and was last up 1.5 percent after earlier hitting its highest since January 8.
Japan's Nikkei average <.N225> gained 0.5 percent.
An easing of concerns about the U.S. economy and its banks, plus hopes the U.S. government is getting to grips with toxic assets has fueled a rise of 18 percent in the MSCI ex Asia index so far this month.
But officials urged more global action.
Monetary and fiscal authorities have plenty of ammunition to combat the deepest downturn in decades and the measures already taken will be critical in driving a recovery, the presidents of the Federal Reserve banks of San Francisco and Cleveland said in separate remarks on Wednesday.
Chinese Finance Minister Xie Xuren said countries should increase their economic stimulus packages if need be to boost market confidence, while a senior IMF official warned the world economy will not start its recovery as expected in 2010 if countries withdraw fiscal stimulus too soon.
Stock indexes in Hong Kong <.HSI>, Shanghai <.SSEC> and Singapore <.FTSTIL> gained about 1-2 percent each. Shares in South Korea <.KS11>, Taiwan <.TWII> and Australia <.AXJO> rose about 1 percent each.
Among the day's leading gainers, Hong Kong-listed ICBC <1398.HK> shares jumped 11 percent after Goldman Sachs
Japan's Elpida Memory Inc <6665.T> surged 18 percent after announcing a plan on Wednesday to raise $471 million eased concerns it would breach debt covenants.
On Thursday the dollar rose 0.2 percent to 97.72 yen, recovering from a slide on Wednesday that pushed it to 96.90 yen.
Geithner told policy-makers and business executives at the Council on Foreign Relations that he was quite open to a Chinese suggestion to move toward greater use of SDRs, a basket of dollars, euros, sterling and the yen, used by the IMF.
Earlier this week, Chinese central bank governor Zhou Xiaochuan said the world should consider using the IMF's SDRs basket as a super-sovereign reserve currency.
But the dollar pared losses after Geithner reiterated that he expected the currency to remain the top reserve currency for a long time.
The euro was steady at $1.3590, having pulled back from Wednesday's high of $1.3653.
Increasing risk appetite is taking away some of the bid for safe-haven debt. But bonds are also being undermined by concerns of massive government supplies to fund stimulus plans.
U.S. Treasuries steadied on Thursday after yields reached their highest levels in a week on Wednesday following tepid demand in a record-large auction of five-year Treasury notes.
The U.S. Treasury is set to auction $24 billion of seven-year notes on Thursday, bringing the week's total issuance to a record $98 billion.
Benchmark 10-year Treasury notes traded steady at a yield of 2.78 percent.
New Zealand bonds fell sharply, sending yields as much as 35 basis points higher on the day as the central bank denied market speculation it would hold an emergency meeting to discuss a sharp spike in five-year bonds.
In commodity markets, oil prices advanced 48 cents to $53.25, while gold prices were steady at $933.10 an ounce.