Asian stocks rose to a fresh life high on Monday as investors bet there will be a U.S. interest rate cut this week, which sent the dollar to a record low against the euro and a basket of major currencies.
A wilting dollar coupled with output disruptions in Nigeria fired up oil prices, sending U.S. crude to $92.79 a barrel for the first time. Gold rode on the coat-tails of oil to a 28-year high near $790 an ounce.
Further lifted by upbeat earnings from firms such as Nissan Motor, Japan's Nikkei average climbed 1.1 percent to one-week highs by 0138 GMT, while MSCI's measure of other Asia Pacific stocks advanced 0.9 percent.
The MSCI index hit an all-time high of 579.41, surpassing the previous peak of 574.04 set last Friday and has gained more than 45 percent so far this year. This compared with a 15 percent rise for MSCI's main world equity index.
Expectations are growing the Fed will cut the rates, though there is no consensus over whether it would be by 25 basis points or 50, said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities in South Korea.
Good earnings from U.S. companies are also boosting investor appetite for equities.
Strong earnings outlook from Microsoft, the world's largest software maker, helped drive the blue-chip Dow up nearly 1 percent and the tech-heavy Nasdaq Composite Index up almost 2 percent on Friday.
Among major markets in the region, South Korea's KOSPI reached a new life high, while Australia's S&P/ASX 200 index was within easy reach of its record high set on October 15.
Markets were led by financial stocks as investors expected that further rate cuts by the U.S. Federal Reserve, whose two-day policy-setting meeting kicks off on Tuesday, will help loosen up credit markets that had been kicked hard by the U.S. subprime market woes.
Japan's top lender, Mitsubishi UFJ, jumped 4.4 percent, South Korea's Kookmin Bank, due to deliver its quarterly results later in the day, gained nearly 3 percent and Australia's investment bank Macquarie Bank added 1.9 percent.
Investors also snapped up Nissan Motor, sending the stock up 11.7 percent, after the automaker posted a surprise gain of 12 percent in quarterly operating profit on Friday, while Australian nickel miner Jubilee Mines surged 41 percent on the back of a $2.8 billion takeover offer from Anglo-Swiss miner Xtrata.
But Advantest Corp skidded 5.5 percent after the world's largest maker of microchip testers posted a drop in first-half net profit and cut its guidance for this year to below expectations.
Amid expectations of lower U.S. rates, the dollar plumbed new depths against the euro. The dollar index, which measures the greenback's value against a basket of six major currencies, eased 0.2 percent after earlier touching an all-time low of 76.890.
The euro rose to a high near $1.4415 and also climbed against the Japanese currency to 164.54 yen. The dollar bought 114.19 yen, little changed from late New York levels on Friday.
The low-yielding yen tends to underperform when stock markets rally as it is usually used to fund the purchases of higher-yielding, more risky assets in the popular carry trades.
A barrage of U.S. data this week, including the advanced reading of third-quarter economic growth report, will help determine the fate of the dollar, especially if they turn out surprisingly positive for the U.S. economy.
All of the dollar negatives are priced in, so we need data and some new factors, said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.
Safe-haven government bonds struggled as demand for riskier assets grew, causing bond yields to rise.
The benchmark 10-year Japanese government bonds climbed 1.5 basis points to one-week highs of 1.630 percent.
The Bank of Japan will also meet this week to discuss monetary policy, but was seen holding the overnight call rate target steady at 0.5 percent.