Asian stock markets rose on Tuesday as the weak U.S. dollar spurred overnight gains in commodities, boosting commodity-linked stocks in the region.
Markets were also buoyed by news that U.S. consumer spending rose for a fifth straight month in February, implying that its consumption may be strong enough to keep a global economic recovery going.
Japan's Nikkei average <.N225> soared to an 18-month high, and looked set to extend gains in the new business year and quarter starting this week despite worries that it was overbought.
The euro was trading more or less flat against the dollar at $1.3479 after rebounding from a 10-month low below $1.38 last week, mainly on short covering ahead of the quarter's end.
The euro was also supported by Greece's successful sale of 5 billions euros ($6.7 billion) of bonds, the first test of investor appetite since European powers last week agreed to a financial safety net for Athens as its battles a debt crisis.
The dollar was also weaker against commodity currencies like the Australian and New Zealand dollar, with the dollar index <.DXY> against major currencies slipping 0.12 percent.
The euro's strength took three-month copper on the London Metals Exchange to its highest level overnight since August 2008. Prices retreated slightly in early Asian trade, but underlying strength was seen likely to stay on improving demand.
The benchmark Nikkei was up 0.5 percent at 11,038 points at the midday break, after earlier rising as far as 11,062.09, its highest since October 2008.
The next quarter is likely to see the Nikkei boxed into a 10,000-11,500 range, said Yutaka Miura, chief technical analyst at Mizuho Securities.
It's risen quite a lot recently on hopes for global economic recovery and good Japanese results, but if these don't live up to expectations there could be some short-term profit-taking.
As of Monday's close, the Nikkei had gained roughly 4.2 percent for the quarter as investors were drawn to its relatively inexpensive valuations, bringing its gains for the financial year ending on Wednesday to 35 percent.
The Nikkei's relative strength index (RSI) is at 68, nearing the 70-plus levels which are considered overbought. But other movement indicators, such as MACD, suggest the Nikkei is still in an uptrend.
Commodities-linked shares climbed after gold hit its highest in more than a week on Monday as investors' risk appetite increased, while other metals rose sharply as economic optimism boosted demand for industrial commodities.
Mitsubishi Corp <8058.T> gained 3.6 percent and steelmakers like Kobe Steel <5406.T> also surged.
Across Asia, the materials sub-sector of the MSCI Asia ex-Japan index <.MIAPJMT00PUS> was up 0.75 percent, compared to a 0.52 percent rise in the overall index <.MIAPJ0000PUS>, with portents of more gains to come.
The news augurs well for mining stocks, including World No. 2 producer Rio Tinto
Analysts were also excited by reports that major Japanese and South Korean steel mills had agreed to a price increase of 90 percent for iron ore this year, which pushed the commodities-linked Aussie dollar up almost a cent, its biggest one-day rally in six months.
Market performance in Asia in the first quarter has been mixed, with the Asia ex-Japan stock rally largely stalling after surging 68 percent in 2009, held back by worries that the global economic recovery and a rebound in corporate profits may sputter.
The MSCI Asia ex-Japan equities index has gained a scant 2 percent so far this year, prompting investors to shift into regional bonds, especially high-yield and riskier credits.
The benchmark JPMorgan EMBI+ credit index for Asia rose 2.8 percent in the first quarter, with far larger gains seen in some Southeast Asian sovereign debt.
The JPMorgan GBI-EM broad index on Indonesia is up 11 percent so far this year in dollar terms, according to Thomson Reuters data.
Oil steadied above $82 a barrel after hitting its highest level in almost two weeks on Monday on optimism about the global recovery, while gold inched up 35 cents to $1.108.55 an ounce.
(Editing by Kim Coghill)