Asian shares rose on Wednesday to their highest level in more than seven months after a jump in U.S. consumer confidence reinforced expectations the global economy has hit a bottom, even if recovery appears fragile.
The safe-haven yen fell, while currencies seen as riskier bets, such as the Australian dollar, advanced. In another sign of improving investor confidence, crude prices pushed to a six-month high above $62 a barrel.
The bolder mood from investors follows a couple of days of caution after North Korea sparked alarm by conducting a nuclear test and launching short-range missiles, and week long fears that the United States could lose its top-notch AAA rating.
We're seeing most risk proxies firmer, said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney.
It's not to suggest that there's an 'onward upwards' recovery in the U.S. and the globe but it is consistent with the idea that the worst is behind us.
The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> had gained close to 2.5 percent as of 0340 GMT to reach its highest level since last October when markets were tumbling in the wake of the collapse of Lehman Brothers.
Japan's Nikkei average <.N225> rose 1.5 percent and was trading just below its 2009 high struck earlier in May.
Elsewhere in Asia, shares in Hong Kong <.HSI> jumped more than 4 percent and Taiwan <.TWII> rose more than 2 percent. The main indexes in South Korea <.KS11> and Singapore <.FTSTIL> advanced well over 1 percent.
U.S. consumer confidence soared in May to its highest level in eight months, even though house prices fell at a record pace in the first quarter, data showed on Tuesday.
Consumer spending accounts for roughly two-thirds of the U.S. economy, so is a positive signal for global trade including for Asian exporters.
Japanese exports rose in April for the second month running, data showed on Wednesday, providing another sign that the slump in global trade may have bottomed.
Still, Germany reported earlier this week a record contraction in its economy in the first quarter, reminding investors of the damage done by the financial crisis.
The more upbeat sentiment comes after North Korea rattled investors this week by carrying out a nuclear test, although analysts expect market impact to be short-lived.
Concerns the United States could lose its AAA rating as it ramps up borrowing to feed a widening budget deficit has also weighed on markets since last week.
However, the sale of $40 billion in two-year U.S. Treasury notes on Tuesday was met by strong interest, especially from overseas, suggesting there are willing buyers of U.S. debt.
Still, traders said longer maturities might not be met by such strong demand. Total issuance for the week is slated to total $101 billion, matching a record set earlier this year. Two more offerings this week will be for five-year and seven-year debt.
The renewed risk appetite was evident in currency markets.
The yen, seen as a safe haven against risk, fell against major currencies.
The dollar rose 0.2 percent to 95.14 yen, after climbing as high as 95.37 yen on trading platform EBS.
The euro gained 0.2 percent to 133.05 yen while sterling, which has risen steadily against the yen since January, touched its strongest level since early November at 152.28 yen.
The Australian dollar hit an eight-month high against the U.S. currency as higher-yielding currencies, which usually benefit when risk appetite increases, firmed.
The so-called Aussie has jumped more than 8 percent this month, supported by both a broad retreat in the U.S. dollar and a rebound in commodity prices.
Crude prices pushed to a six-month high above $62 a barrel, gaining some support in the wake of the U.S. consumer confidence data and comments from Saudi Arabia's oil minister that oil prices would hit $75 a barrel during the third and fourth quarters of this year.
Oil has rallied since its lows in December below $33 a barrel.
OPEC ministers meet in Vienna on Thursday to consider production policy but are expected to leave output unchanged.