Asian shares edged higher on Wednesday looking past a surprise fall in U.S. consumer confidence and the Australian dollar jumped to a 13-month high after August retail sales data beat forecasts.
China's main stock market opened higher boosted by the acquisition plans of Industrial and Commercial Bank of China (ICBC) <601398.SS>, the world's biggest bank by market value, while the Korean won rose to a near one-year high.
GDP and earnings are still being upgraded, valuations are not horribly expensive and cash is still zero percent, we are in a sweet spot, said Khiem Do, head of the Asia multi-asset group at Baring Asset Management.
He expects the stock rally to sustain and corrections to remain mild for the rest of the year.
Referring to U.S. consumer confidence he said: It is a volatile data, next month it may be up again and it is very difficult to predict. Its not as if its been falling for months in a row.
The Aussie dollar, which has been on a uptrend after recent market talk about an imminent rate hike lifted its yield allure, received a further boost as data showed consumers continue spending even as the stimulus program nears its end.
The data took the currency to a peak of $0.8800 and pushed interest rate swaps to a three-week high as markets priced in a greater chance of a rate increase in October.
The Shanghai Composite Index <.SSEC> rose as much as 1 percent after ICBC said it was bidding to buy Thailand's ACL Bank
Yet, the benchmark stock index has lost around 7 percent so far this quarter and is heading for its worst quarterly performance this year, mainly reflecting worries about an oversupply of shares.
South Korea's won currency rose as high as 1,180.1 to a dollar, the strongest since October 14, 2008, forcing foreign exchange authorities to buy the greenback to curb the won's strength.
Exporter deals and foreign fund inflows also boosted the Taiwan dollar to a near one-year high. The currency rose to as high as T$32.198 to the U.S. dollar.
Broadly, Asian stock markets were higher as investors ignored an unexpected fall in U.S. consumer confidence in September, which brought down shares at Wall Street.
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> was up 0.5 percent and is set to post a second straight quarterly gain.
The index is up 21 percent this quarter, adding to the second quarter's 32 percent gains.
Meanwhile, the U.S. dollar slipped against the yen as the recent short-covering, which had given the greenback a brief boost, abated. The dollar fell 0.3 percent from late New York levels to 89.77 yen, although it remained above its eight-month low of 88.23 yen set on Monday.
Traders are not surprised the dollar is reversing track as the broad downtrend for the U.S. currency is still down.
It's hard to believe dollar selling is over, said Shuichi Kanehira, senior vice president of the forex division at Mizuho Corporate Bank.
(Additional reporting by Rika Otsuka in Tokyo; Editing by Jan Dahinten)