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Asian shares were steady and the dollar remained firm on Wednesday as US stocks rallied to record highs overnight on signs of resilience in the US economy and expectations of continued monetary policy support.
The Dow Jones industrial average hit another record high on Tuesday as data showed US home prices accelerated by the most in nearly seven years in March while consumer confidence picked up in May to its highest in more than five years.
The stock rally lifted benchmark 10-year US Treasury yield to a 13-month peak around 2.17%. A strong rebound in Japanese stocks after last week's hammering also fed to speculation about reduced incentives to hold safe-haven US government debt.
"The bullish tone at the start of the week would seem to indicate that investors are not yet convinced that evidence surrounding the economy is firm enough to corner the Fed chairman and force him into leading a retreat from the current pace of bond purchases," Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York, said in a note to clients.
The rally seems to be "little other than a sense that last week's setback for US and then Japanese stocks was justifiable in the big scheme of things. Pullbacks occur," he said, adding that for now, investors seem to still want to test recent highs.
MSCI's broadest index of Asia-Pacific shares outside Japan was steady, staying above Friday's five-week low of 464.99.
Australian shares were up 0.2% while South Korean shares opened 0.4% higher.
"The main board is likely to start up as overseas markets rallied on the previous day. However, autos could weigh due to the weak yen and cap gains later in the session," said Shawn Oh, an analyst at Daishin Securities, of Seoul shares.
The dollar inched up 0.1% against the yen to 102.48, recovering from a two-week low of 100.66 yen hit on Friday. The dollar scaled a 4-1/2 year peak of 103.74 yen on May 22.
The dollar index measured against a basket of six key currencies was up 0.3% to hover near its highest since July 2010 of 84.498 reached on May 23.
The Nikkei stock average opened up 1.3% after closing up 1.2% the day before.
"The Nikkei is in oversold territory, so buying should emerge," said Hiroichi Nishi, equity general manager at SMBC Nikko Securities. "Exporter shares will be in focus again as the yen resumes weakening, but we have to watch interest-rate related issues."
The Nikkei slumped 7.3% on Thursday, its largest single-day loss since the March 2011 earthquake and tsunami, as global financial markets were shaken by weak industrial production in China and concerns the US Federal Reserve could scale back its current aggressive monetary stimulus sooner than previously thought.
Speculation about the Fed's policy has weighed on the Australian dollar, which has skidded nearly 8% in May, the largest monthly drop since September 2011. The Aussie plumbed its lowest in 19 months on Wednesday after key support around $0.9581 finally gave way.
US crude futures were off 0.3% at $94.74 a barrel.
