Asian stocks snapped a four-day losing streak on Tuesday as an overnight bounce in U.S. shares boosted risk appetite while gold briefly popped to a one-year high on growing expectations of more policy stimulus.
Market attention will be focused on the Australian central bank's interest rate decision later in the day. Economists don't expect any change to policy at this meeting so a surprise rate cut would add to concerns about the lack of growth in the global economy.
MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.39 percent higher in early trade, rising from a three-week low tested on Monday.
U.S. stocks rose on Monday, rebounding from losses last week, as financials gained with Berkshire Hathaway and dollar weakness eased worries about corporate earnings.
In currency markets, the dollar nursed sharp losses sustained against other currencies in the previous sessions with a lackluster reading on growth in the U.S. manufacturing sector weighing on sentiment.
The yen's near 5 percent gains against the dollar last week after a shock decision by Tokyo to keep monetary policy unchanged capped its best weekly performance since the depths of the global financial crisis in 2008.
In early trading on Tuesday, the yen rose to a fresh 18-month high against the dollar, with the greenback trading at 106.14 yen.
The dollar index, which measures the dollar's performance against a trade-weighted basket of its peers, is trading at its lowest since January 2015.
In Asia, despite its recent losses, the Australian dollar remains vulnerable to any sudden policy changes due to heavy positioning. Currency futures positioning reveal long positions in the Aussie at their highest levels in almost two years.
Thin liquidity also amplified moves with Japan in the middle of its Golden Week series of holidays. Markets were closed on Friday, and will be closed on Tuesday to Thursday this week.
After raising interest rates in December for the first time in nearly a decade, the Fed held monetary policy steady last week. While it kept the door open to a hike in June, it gave no signal that it was in a hurry to tighten further given the economy's slowdown, even as the labor market has improved.
Crude oil futures edged lower after hitting 2016 highs on Friday as fears of a global supply glut eased.
Oil futures were broadly steady at $44.76 a barrel in Asian trading after hitting $46.78 a barrel on Friday, an 80 percent rally since their February lows.
Spot gold briefly rose above $1,300 an ounce in the previous session, its highest since January 2015, before edging lower on Tuesday.