Asian shares swept to their highest levels for 2009 on Wednesday after upbeat U.S. economic news boosted riskier assets leveraged to global growth, while the U.S. dollar slipped to a one-year low.
Commodities also benefited from the wave of optimism, with gold spiking to an 18-month high above $1,016 an ounce and crude oil briefly climbing above $71 a barrel.
Most major Asian stock indexes posted gains of 1 percent or more in the wake of Tuesday's strong reading on U.S. retail sales, with exporting countries leading the way.
South Korea's KOSPI <.KS11> climbed 1.8 percent to a 15-month closing peak, while Australia's resource-packed S&P/ASX 200 index <.AXJO> jumped 2.4 percent to an 11-month high.
The sentiment is phenomenal. Right across the board it's green as a vegetable garden in spring, said Michael Heffernan, senior client adviser and strategist, Austock Group in Sydney.
It's chalk and cheese compared to a year ago when there was no confidence. Now people are gradually getting confidence back. The sentiment and the ambience of the market is decidedly upbeat, he said.
While Heffernan was referring to the Australian market, his sentiment seemed to be shared across the region.
The MSCI index of Asia-Pacific shares <.MIAPJ0000PUS> excluding Japan rose 2.1 percent to its highest this year. The MSCI benchmark is now up about 53.5 percent for the year.
Investors even managed to look past a 1 percent decline in the volatile Shanghai market <.SEC>, virtually the only regional market to ease on Wednesday.
Japan's benchmark Nikkei <.N225> added a more modest 0.5 percent, restrained in part by uncertainty over the economic policies of the new government.
Japan's new prime minister, Yukio Hatoyama, takes office on Wednesday and is set to announce his cabinet line-up after a huge election win.
The Bank of Japan began a two-day policy meeting, but analysts weren't holding their breath for the outcome given rates are already near zero and policymakers are reluctant to go any further with exceptional easing measures.
The gains for Asian stocks came courtesy of better U.S. news.
U.S. retail sales jumped 2.7 percent in August, the fastest growth in 3-½ years, data showed on Tuesday.
Federal Reserve Chairman Ben Bernanke felt confident enough to declare the U.S. recession very likely over, though he added that the recovery would be very slow.
The rise in sales added to expectations U.S. economic growth would stage a sizable rebound in the third quarter, thanks in part to businesses rebuilding inventories to meet demand.
That in turn augured well for the exporting nations of Asia and their currencies, especially those of big commodity producers such as Australia.
As the global recovery continues and risk diversification takes place we could see the U.S. dollar stay under pressure for the next six months, said Amber Rabinov, an economist in foreign exchange and international economics at ANZ in Sydney.
Measured against a basket of major currencies <.DXY> the dollar slipped as deep as 76.376, the lowest since last October, while the euro powered to a new 2009 high around $1.4690.
The dollar also eased to 90.60 yen, partly on talk investors were using the U.S. currency for carry trades.
Until recently, the low-yielding yen was the currency of choice for investors who borrow cheap to buy riskier assets or high-yielding currencies. But that has changed since 3-month U.S. LIBOR rates fell below Japanese rates.
We expect the dollar to test its recent lows on the yen, and probably fall as low as 87 yen as talk of it replacing the yen as a funding currency gathers momentum, said Rabinov. (Writing by Wayne Cole; Editing by Hugh Lawson)