Asian markets surged Wednesday, while the dollar held its strength after overnight gains as buying confidence returned to trading floors ahead of an expected US interest rate rise.
After more than a week of sharp losses, equities enjoyed some healthy buying after a rally in New York and Europe fuelled by upbeat economic data and a rare rally in oil prices.
However, the crude gains were short-lived and prices resumed their downtrend in Asian trade Wednesday, with buying dampened by data indicating US stockpiles rose last week.
The commodity has taken a hammering since December 4 -- falling about 12 percent -- when the OPEC exporters' group refused to set output limits, adding to worries about a supply glut.
The Federal Reserve is expected later Wednesday to raise borrowing costs at its policy meeting, ending months of speculation and uncertainty on global markets.
And while the move would be considered a reason to sell shares, analysts said the rise had largely been priced into assets.
"Markets had time to prepare for this day, with investors winding back risk ahead of the event," Tim Schroeders at Pengana Capital in Melbourne told Bloomberg News.
- Volatility warning -
However, he added: "What happens after the Fed rate hike is difficult to tell, especially since we’re coming into a quiet period around Christmas and New Year. Volatility will probably continue."
The case for an increase has grown stronger over the past year as the US economy continued to show it was enjoying a healthy recovery. The argument was reinforced Tuesday by data showing year-on-year consumer inflation hit two percent in November, matching the Fed's target rate.
The news lifted the dollar to 121.66 yen in New York from around 120.80 yen earlier Tuesday in Asia, while the euro dipped to $1.0930 from above $1.10.
In Tokyo on Wednesday the dollar edged up against the Japanese unit but eased slightly against the single currency, which won some support from a better-than-expected reading on investor confidence in Germany, Europe's biggest economy.
Regional stock markets were all higher, with Tokyo climbing 2.6 percent by the close, Sydney up 2.4 percent and Seoul 1.9 percent higher. Shanghai gained 0.2 percent.
Hong Kong was up 2.1 percent in afternoon trading, ending a nine-session losing streak -- its longest run of selling since 1984 -- that saw it stumble more than five percent.
The gains in Asia tracked similar advances in Europe, where Paris and Frankfurt added more than three percent and London gained 2.5 percent Tuesday. And in New York the Dow, Nasdaq and S&P 500 climbed around one percent.
- Key figures around 0730 GMT -
Tokyo - Nikkei 225: UP 2.6 percent at 19,049.91 (close)
Shanghai - composite: UP 0.2 percent at 3,516.19 (close)
Sydney - S&P/ASX200: UP 2.4 percent at 5,028.40 (close)
Hong Kong - Hang Seng: UP 2.1 percent at 21,725.33
Euro/dollar: UP to $1.0946 from $1.0930 late Monday.
Dollar/yen: UP to 121.86 yen from 121.66 yen
New York - Dow: UP 0.9 percent at 17,524.91 (close)
London - FTSE 100: UP 2.5 percent at 6,017.79 (close)