By Hideyuki Sano
TOKYO (Reuters) - Asian shares advanced on Friday after brisk U.S. factory activity data and a commitment to easy monetary policy by European central banks and the Federal Reserve buoyed Wall Street to record highs overnight.
Stirred by optimism on the U.S. economic recovery, the yield on benchmark U.S. Treasuries edged closer to a two-year high and triggered a sharp rebound in the dollar from a six-week low hit against a basket of currencies on Wednesday.
European shares look set to reach highs not seen for more than two months, with Germany's Dax seen rising as much as 0.5 percent, the France's CAC 40 0.3 percent, and Britain's FTSE 0.2 percent.
U.S. stock futures pointed to further gains later in the day.
A strong reading in U.S. payrolls data, due at 1230 GMT, would likely to stoke momentum in markets, possibly pushing the 10-year U.S. yield to new two-year highs.
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"Essentially, the market is waiting for a global economic recovery in the latter half of this year," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.
"We had a decent Chinese manufacturing data yesterday. Periphery European countries are also improving recently. And central banks have confirmed that easy policy will be in place. These are the reasons why a rise in bond yields are not destabilising share prices today, unlike in June," he added.
The European Central Bank and the Bank of England both ended policy meetings by leaving interest rates at record lows on Thursday, a day after the Fed said the U.S. economy still needed its support and avoided any mention of a change to its stimulus measures.
Japan's Nikkei share average rose 2.7 percent, while ex-Japan Asian shares gained 0.3 percent.
Shares in South Korea and Hong Kong hit two-month peaks while Australian stocks rose to a 2 1/2-month highs.
On Thursday, the Dow Jones index rose 0.8 percent and S&P 500 gained 1.3 percent to end above 1,700 for the first time ever.
The dollar index held onto Thursday's gains of 1.1 percent, its biggest one-day rally in a month, to stand at 82.318, extending its rebound from six-week low of 81.407 hit on Wednesday.
The broad rally in the dollar saw the euro ease to $1.3206, flat on the day but off Wednesday's six-week high of $1.3345, while the yen fell towards 100 per dollar, well off this week's high around 97.58.
The Australian dollar hit a three-year low as the currency was still smarting from dovish comments by the Reserve Bank of Australia (RBA) on Tuesday.
That prompted markets to not only price in a cut in interest rates next week, but a second easing before year-end, shrinking the yield premium offered by Australian over U.S. debt to its lowest since 2008.
The dollar's broad strength also pushed down the gold prices more than one percent to a two-week low of $1291.60.
On Thursday, U.S. data underlined the markets' optimism about the recovery in the world's largest economy. The Institute for Supply Management index of U.S. national factory activity for July rose to its highest level since June 2011, easing concerns a slowdown in emerging economies may take a toll on U.S. growth.
A separate report also showed first-time applications for jobless benefits hit a 5-1/2-year low last week, boding well for the payroll data.
A monthly rise in hiring in the 200,000 area, analysts say, should keep the Fed on track to start to pare its $85 billion purchases of Treasuries and mortgage-backed securities as early as at its September 17-18 meeting.
"The market has digested the idea that the U.S. tapering will occur at some point," said Andrew Doherty, head of equities at Morningstar, an independent research house based in Sydney.
"There's been a reappraisal and revaluation that has seen moves back into high-yielding stocks providing decent returns for investors."
Expectations of a gradual reduction in the Fed's bond buying drove the 10-year U.S. Treasuries yield to 2.714 percent, within sight of a two-year peak of 2.755 percent hit last month.
Brent crude futures climbed to a four-month high of $110.09 as upbeat economic data raised the prospects for stronger global oil demand amid supply disruptions in Africa and Iraq.
(Additional reporting by Thuy Ong in Sydney; Editing by Shri Navaratnam & Kim Coghill)