Tokyo stocks jumped to a seven-month high on Friday as Asian shares rose on signs Greece is a step nearer to securing a bailout fund, and expectations U.S. nonfarm payrolls data due later in the day will confirm a labour market recovery.
Results of Greece's bond swap with private creditors showed that 85.8 percent of private creditors had accepted its bond swap offer and that the rate would reach 95.7 percent with the use of collective action clauses to enforce the deal.
The euro fell to around $1.3230 (838 pence) from around $1.3260 (839 pence) after the announcement.
The headlines from Greece are within expectations and the market reaction is a classic case of buy the rumour, sell the fact said Yuji Saito, director of the foreign exchange division at Credit Agricole Bank in Tokyo.
Earlier, officials said a strong take-up of the offer would open the way for Athens to secure funding needed to clear a major bond redemption falling due on March 20.
Japan's Nikkei average jumped more than 2 percent to a seven-month high, spearheading the rally in the MSCI Asia Pacific ex-Japan index, which gained as much as 1.3 percent. The pan-Asian index was set for a weekly loss of about 1.2 percent, however, as growth concerns dragged prices lower earlier in the week before optimism over Greece took over.
There seems to be a general presumption now that it's (Greece's debt restructuring) a done deal and that tonight's announcement will merely be a formal ratification, said Ric Spooner, market strategist, CMC Markets.
The dollar hit a 9-1/2-month high against the yen above 81.873 yen. Commodity currencies such as the Australian dollar held steady around $1.0650 (674 pence) on confidence the Greek bond swap would go through, although a surprise drop in Australia's trade deficit in January briefly weighed on the currency.
China's retail sales and industrial output came in below forecast, reflecting slowing growth momentum in the world's second largest economy, and weighed on Chinese shares.
Earlier data showed China's annual inflation cooled surprisingly sharply to a 20-month low of 3.2 percent in February, below its 2012 target of 4 percent, giving Beijing room to ease policy if needed.
The latest CPI number is mainly because of the dissipation of the Chinese New Year effect. Prices came down after the holiday, especially food prices, said Kevin Lai, economist at Daiwa in Hong Kong. We think that inflation is not a risk anymore.
Spot gold inched up 0.3 percent to $1,705 (1,079.32 pounds) an ounce on hopes for further easing by China.
U.S. JOBS AFTER GREECE
As Greece appeared on track to proceed with the debt swap deal, the focus turns to how Greece treats the minor holders of foreign law-issued debt, where there's a lot more uncertainty, said Adrian Foster, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong.
Greece clearly wants them to participate on the same sort of basis as the Greek law debt and I do wonder whether the issue now has sufficiently become ring fenced in that in fact Greece can declare default. That might be the outcome, he said.
But I just wonder if it's not as sensitive now as it was only a couple of months ago with all this ECB liquidity flushing around in the European financial system, Foster added.
Greece will top an acceptance rate of 95 percent in a bond swap plan only after collective action clauses (CAC) that enforce losses on any holdouts are imposed, a government official said.
That may trigger payouts on the credit default swaps (CDS) that some investors held on the bonds, an event which would have unknown consequences for the market.
All these prospects are more or less within expectations, and now that the refinancing risk will likely be cleared, the real question is whether Greece can keep paying for its debts in order to sustain the lifeline from global lenders, a Tokyo-based analyst at an European securities firm said.
A disorderly default by Greece would have triggered much more far-reaching financial damage than the losses its bond holders suffer. A messy default would risk reigniting concerns about financing in other similarly debt-burdened euro zone countries and undermine the euro.
Even when a messy default is prevented, the upcoming election in Greece next month will be the next risk factor, said Saito at Credit Agricole Bank in Tokyo.
Hopes for Greece and expectations for solid U.S. economic data underpinned prices of copper and oil on Friday.
Friday's U.S. data is expected to show a rise of 210,000 in nonfarm payrolls, with a gain in the private sector of 225,000 jobs offsetting a modest decline in government jobs.
Brent crude added 0.1 percent to $125.62 (79.52 pounds) a barrel, while U.S. crude rose 0.3 percent to $106.89 (67.66 pounds) a barrel.
Copper rose for a third day, rising 0.9 percent to $8,405 (5,320.63 pounds) a tonne.
Sentiment in Asian credit markets also improved, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by about 5 basis points.
(Additional reporting by Amy Pyett in Sydney; Editing by Jacqueline Wong)