The euro jumped and Asian stocks extended gains on Friday after stunning German data showed Europe's biggest economy grew at its fastest pace in 23 years, alleviating some doubts about the strength of global growth.
The euro and S&P futures jumped after Germany's economy was shown to have grown 2.2 percent last quarter, driven by exports and investment. The euro climbed as far as $1.2902.
The dazzling data, which handily beat forecasts for a 1.3 percent rise, lifted European stocks 0.5-0.8 percent higher at open.
The German economy is booming thanks to global demand, said Andreas Scheuerle, an analyst at Dekabank in Germany. I can see 3 percent growth this year, even a bit more than 3 percent.
By late afternoon, the MSCI index for Asian stocks outside Japan was up 1.2 percent.
Germany's remarkable growth report turned the spot light away from the yen, which shunned 15-year peaks on Friday, daunted by talk that Tokyo may intervene to curb its strength.
Swirling talk that Tokyo will weaken the yen by undertaking more quantitative easing kept the dollar off a 15-year trough of 84.72 hit on Wednesday.
The retreat in the yen, which had zoomed up by as much as 3.9 percent before all the talk of intervention, mirrored similar pull-backs in other assets that were over-bought or over-sold this week when investors vexed about global growth prospects.
But some analysts warned the market cheer may not last. A raft of U.S. data including consumer confidence and consumer prices are due later, and investors fear they may disappoint.
South Korea's stock market <.KS11> was the best performer, climbing 1.4 percent from one-month lows, led by technology stocks such as Samsung Electronics <005930.KS>.
For the week however, the MSCI index was still down 2.6 percent, its worse performance in six weeks.
Indeed, data from EPFR showed stocks was not a popular investment choice right now, with investors preferring bonds and money market funds instead.
Firm Asian stocks and a soft U.S. dollar helped oil prices to climb $1 to above $76, recouping some of the week's heavy selling.
YEN INTERVENTION NIGH?
By late afternoon, the dollar was a touch firmer on the yen at 86.11, up from 85.84 in New York.
Fervent speculation on when and how Tokyo will try to weaken the yen got a boost following a report that said Japan's prime minister will meet its central bank chief to discuss possible intervention.
But some analysts doubted a direct market intervention was on the cards and argued instead the Bank of Japan may opt for more quantitative easing.
The Japanese authorities have no appetite for FX intervention, analysts at JPMorgan said.
Not only do they doubt the efficacy of intervention, but yen-selling would be difficult to justify, given strong G7 rhetoric against currency manipulation, they wrote in a note to clients. It is politically unpopular given the magnitude of the losses on Japan's foreign currency reserve.
U.S. crude for September delivery rose as much as $1 on Thursday after a 7 percent tumble in the past three days that took prices to their lowest since July 19.
(Additional reporting by Adrian Bathgate in WELLINGTON and Wayne Cole in SYDNEY; Editing by Kazunori Takada)