Asian shares surged and the euro recovered on Tuesday as investors covered short positions and hunted for bargains while awaiting U.S. Federal Reserve Chairman Ben Bernanke's view on the U.S. economy expected later in the day.
European stocks were likely to rise, tracking Asia and a 0.5% increase in U.S. stock futures that pointed to a stronger start in Wall Street. Financial spreadbetters called the main indexes in London, Paris and Frankfurt to open up as much as 0.6%.
Weak U.S. retail sales and a lower International Monetary Fund global growth forecast on Monday raised hopes of more monetary stimulus from the Fed, as Bernanke was set to give his semi-annual Congressional testimony on Tuesday and Wednesday.
He is expected to reiterate the bank's stance that it will take further action only if economic conditions worsen.
Some traders cited the Reserve Bank of Australia's minutes as spurring further buying in riskier assets, as they suggested the central bank may be spared for now from having to cut rates further to support growth.
Australia's central bank said it saw "no need" to cut interest rates at its July meeting because a material easing had already been delivered and data showed the domestic economy had more momentum than first thought.
The Australian dollar hit a session high near $1.0300 after the minutes, up from $1.0248 late on Monday.
Traders also said short covering in the euro — when players buy back the currency to realise gains on an earlier bet it would fall — gained further momentum after the minutes.
The dollar found support against the yen after Japanese Finance Minister Jun Azumi said he was prepared to take firm measures on currencies when needed, a hint that Tokyo could intervene in the market, as a firm yen would hurt Japan's economy.
HONG KONG SHARES RALLY
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.3% for a third straight day of gains, with Chinese equities leading their peers.
Hong Kong shares rallied 1.8% on a mix of factors including strong performance in Chinese insurers due to solid premium growth in June, rising rail stocks on expectations for more government investment, as well as stop losses triggered on Hang Seng index futures contracts at the 19,200 level.
Australian shares rose 1% as investors moved into stocks with strong dividend yields while South Korean shares gained 0.8% on programme arbitrage trading.
Japan's Nikkei stock average added 0.8% after a public holiday on Monday.
Weakness in U.S. retail sales in June fuelled investor concerns as the retail sector drives about two-thirds of the U.S. economy.
The pressure on the United States may get stronger after the IMF, along with cutting global growth forecast, warned of a dimming outlook if European policymakers do not act forcibly and promptly to quell their region's debt crisis.
The weak U.S. retail sales data pushed the 10-year Treasury yield down to 1.442% on Monday, matching the record low hit on June 1, while the dollar fell to a one-month low of 78.69 yen. The dollar was at 78.92 yen on Tuesday.
Oil steadied from earlier losses, with Brent crude up 0.1% at $103.49 a barrel and U.S. crude inching up 0.1% at $88.54 a barrel.
The euro stood at $1.2292 on Tuesday, off its two-year low of $1.2162 hit on Friday, and at 97 against the yen, above a six-week low of 96.17 yen touched on Monday.
