Asian stocks leapt to their highest in nearly a month on Monday as risk appetite improved on talk of a quick bailout for Greece and as investors looked past the Federal Reserve's discount rate hike to signs of strength in the U.S. economy.
The euro edged higher after German magazine Der Spiegel reported at the weekend that Germany's finance ministry had prepared a bailout plan for debt-laden Greece in which euro zone countries would provide aid worth 20 billion to 25 billion euros.
European stock index futures pointed to a slightly higher open as markets waited to see if a rescue plan would really materialise, while U.S. stock futures rose 0.3 percent.
A pause in the dollar's rally spurred gold to its highest level in a month and helped oil prices to a six-week high.
The MSCI index of Asian stocks traded outside Japan rose 2.2 percent, at one point hitting its highest level since Jan 26, helped by shares in the materials and energy sectors as commodity prices pushed higher.
"Positions have been significantly unwound and are very light across most asset classes," said Peter Redward, head of Emerging Asia Research, Barclays Capital, referring to recent market jitters about Greece and concerns about monetary tightening globally.
"That means potentially if we get a period of good news, we could see markets run for a little while."
Japan's Nikkei stock average rose 2.7 percent to its highest close in three weeks. The rally was led by exporters whose shares were boosted by a weak yen amid recent dollar strength.
"Investors on Friday were worried about the impact of the U.S. discount rate hike on Wall Street, but U.S. markets in the end were quite settled," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
The Fed said late on Thursday that it would raise the interest rate it charges banks for emergency loans to 0.75 percent from 0.5 percent, taking a step towards normalising emergency policy used to fight the worst financial crisis since the Great Depression.
Asian stock markets fell heavily on Friday in the first global reaction to the move, but after initial nervousness U.S. investors preferred to view it as a sign that the economy was healing, helping stocks on Wall Street close out their best week of the year.
Asian share markets were also buoyed by a relatively calm start in Chinese markets as they re-opened after a week-long holiday and had their first chance to react to a surprise central bank tightening move on Feb 12.
Markets had feared a heavy selloff in Shanghai after the People's Bank of China raised banks' reserve requirements for the second time this year, but China's key stock index was little changed for much of the day before ending down 0.5 percent.
Hong Kong's benchmark Hang Seng Index rose 2.3 percent, lifted by consumer-sector focused China Resources Enterprise amid signs of stability in Chinese markets and oil producer CNOOC which rose on firmer oil prices.
South Korean shares ended a two-day losing streak with the benchmark index up 2 percent, boosted by rebounds in the technology and financial sectors.
"Asian markets at these levels are quite cheap and there is reasonable good growth in the region over the next 1-2 years so we think that these levels are buying levels," said Khiem Do, head of the Asia multi-asset group at Baring Asset Management, which oversees $50 billion.
"We still like North Asia — Taiwan, South Korea and China."
EURO FIRMS, DOLLAR DOZES
The euro jumped as much as 0.3 percent to $1.3655, before surrendering gains to trade marginally firmer at 1.3620.
The currency struck a nine-month low of $1.3443 on trading platform EBS on Friday after the Fed announced its decision to raise the discount rate.
But analysts do not expect a quick resolution to Greece's problems, despite the initial optimism in markets.
"Bear in mind the Europeans have not given us specifics — there is still room for disappointment. It will simmer away in the background as a concern for the markets," said Redward.
The dollar index, which measures the dollar's value against a basket of currencies, dipped 0.2 percent to 80.469, having retreated from an eight-month high of 81.342 hit on Friday.
The dollar's decline helped push up oil prices, which were already gaining on concerns about an extended refinery strike in France and escalating tensions over Iran's nuclear program.
Oil prices rose 45 cents to above $80 a barrel, the highest since Jan 13.
