Japan's Nikkei share average surged to a 5-1/2-year high on Wednesday as Japanese exporters rallied after the yen's recent slide, while the dollar showed resilience, supported by signs of an improving U.S. economy.
The dollar eased 0.1 percent to 102.22 yen, but still remained near Tuesday's high of around 102.40 yen, the greenback's strongest level against the Japanese currency since October 2008.
"Right now the market is dominated by dollar strength, and I think that will continue for a while," said Kyosuke Suzuki, director of FX at Societe Generale in Tokyo.
European stock futures pointed to a mixed open on Wednesday. At 0604 GMT, futures for Euro STOXX 50 were flat, UK's FTSE 100 futures rose 0.3 percent, Germany's DAX futures gained 0.1 percent and France's CAC futures were down 0.1 percent.
In Asia, Japan's Nikkei share average climbed above the psychologically key 15,000 threshold for the first time since January 2008, getting a boost from the weak yen, which helps Japanese exporters.
Analysts said strength in overseas shares was causing funds to flow into the Japanese market despite the fast pace of gains, although some investors were also taking profits on sectors sensitive to rising long-term interest rates.
"The sectors which rose on the back of the government's reflationary policy are prone to profit-taking as these sectors greatly outperformed earlier," said Hikaru Sato, a senior technical analyst at Daiwa Securities.
The Nikkei jumped 2.3 percent to 15,096.03. The benchmark Japanese stock index rose to 15,108.83 earlier, its highest level since January 2008.
Real estate shares and financials underperformed, however, with Mitsui Fudosan Co shedding 2 percent.
The 10-year Japanese government bond (JGB) yield touched a peak of 0.920 percent, its highest level in more than a year. The 10-year yield later came off that high as JGBs pared their losses due to bargain hunting by investors.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent to 482.34. Australian shares fell 0.5 percent, while South Korean shares inched up 0.1 percent.
Some market players expect investor appetite for risk to remain fairly solid given recent signs of an improving U.S. economy.
"A combination of further improvement of economic performance and low inflation in the U.S. should keep risk appetite buoyant and support the USD on higher yields," said Anthony Lam, strategist at Credit Agricole in a note.
Earlier on Wednesday, the U.S. 10-year Treasury yield touched a two-month high of 1.985 percent.
Data this week showed U.S. retail sales rose unexpectedly in April, underpinning the dollar which could gain further if upcoming U.S. economic data also points to a recovery.
U.S. import prices fell in April due to a drop in oil costs, a positive sign for household finances that also indicated benign inflation pressures.
The dollar has rallied broadly over the past couple of weeks as better-than-expected jobs data coupled with a recent decline in the number of Americans filing new claims for jobless aid, pointed to a strengthening labour market.
The dollar index, which measures the greenback's value against a basket of currencies, last stood at 83.615, staying near Tuesday's 10-month high of 83.687, the greenback's highest level since last July.
In commodity markets, spot gold eased 0.1 percent to $1,424.19 an ounce. Gold is still down for the week, as economic optimism and record high U.S. equities lessened its appeal as a safe haven.
U.S. crude oil futures gained 0.1 percent to $94.27 a barrel and Brent held steady at $102.63.
U.S. stocks rallied to record highs on Tuesday, continuing an ascent driven by the Federal Reserve's easy monetary policy, though investors' focus has turned to when the Fed may start to rein in its bond-purchase programme.
