Japanese stocks jumped more than 4 percent on Tuesday amid reports of progress in stabilizing an earthquake-damaged nuclear plant and the yen edged up, putting traders on heightened alert for more central bank intervention.
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Gold edged higher supported by a weak dollar and violence in the Middle East that boosted its safe-haven appeal.
Asian shares outside of Japan posted modest gains to recoup all of last week's losses, building on gains on Monday when Tokyo markets were closed for a holiday.
A firm close for U.S. stocks after AT&T's move to buy Deutsche Telecom offered Asia support.
"Shares are bouncing with the Japan nuclear fear abating as the latest news reports point to steady progress on repairs at the nuclear plant site," said Kwak Joong-bo, a market analyst at Samsung Securities in Seoul.
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However, European shares were seen opening lower in payback for three sessions of gains and S&P 500 futures were down 0.1 percent, pointing to a subdued Wall Street later.
Tokyo's Nikkei share average rose 4.4 percent to close near its intraday high.
Nikkei futures traded in Osaka rose a similar amount and Chicago-traded Nikkei futures gained 3.2 percent. .T
"Global value funds together with long-only investors are piling right in the middle of the index today, chasing big, liquid stocks attracted by cheap valuations," said Tetsuro Ii, CEO of Commons Asset Management.
The Nikkei is trading at a price-to-book ratio of 1.1, lower than 2.2 for the U.S. benchmark S&P 500, Thomson Reuters Starmine data shows.
The Nikkei is down 6.3 percent from its close on March 11, the day northeastern Japan was struck by a 9.0 magnitude earthquake and a 10-meter tsunami. The disaster has left at least 21,000 people dead or missing and crippled a nuclear power plant.
On Tuesday, technicians working inside an evacuation zone around the stricken plant 240 km (150 miles) north of Tokyo had managed to attach power cables to all six reactors and start a pump at one of them to cool overheating nuclear fuel rods.
But rising smoke and haze from two of the most threatening reactors suggested the battle to avert a disastrous meltdown was far from won, and mounting evidence of radiation in vegetables, water and milk stirred more concerns about the long-term impact.
MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, bolstered by a rise in the Dow Jones industrial average and broader S&P 500 of 1.5 percent.
Asian shares outside Japan have now recovered all the ground they lost after the earthquake.
The yen traded up about 0.1 percent around 80.90 per dollar and edged up against the euro to around 115.10.
Last week, expectations the cost of quake reconstruction would prompt insurance firms and others in Japan -- a big net creditor to the rest of the world -- to repatriate yen drove the Japanese currency to a record 76.25 per dollar before the Group of Seven rich nations stepped in on Friday.
Leading central banks spent more than $30 billion to drive the yen back above 80 to the dollar, the first such coordinated intervention since 2000. Traders said the Bank of Japan might intervene again if the dollar falls closer to 80 yen.
The dollar on Tuesday skidded as investors embraced leveraged risk trades in stocks and commodity-linked currencies such as the Australian dollar.
Expectations the Federal Reserve will maintain its super-loose monetary policy for some time to come have made it safe to borrow dollars to fund investments in higher-yielding currencies and assets -- the so-called carry trade -- traders said.
European Central Bank policymakers, in contrast, have been warning they are ready to raise interest rates despite uncertainty about the strength of the economy, helping to push the single currency to a four-month high.
The euro rose to highs not seen since November at $1.4240 and was later trading around $1.4225, while the dollar index .DXY broke down through support at 75.631, the low hit in the aftermath of the Federal Reserve's second round of quantitative easing.
"Though much of the focus has been on JPY and the chances of further coordinated intervention, the USD is barely able to defend itself," said David Watt, a senior currency strategist at RBC Capital Markets.
Benchmark 10-year Japanese government bond futures fell 0.34 point to 139.40, while the 10-year yield edged up 0.4 basis point to 1.245 percent.
"I expect the 10-year JGB yield will move around 1.2 percent. I was selling JGBs last week but I started to buy a little bit this week," said a fund manager at a U.S. asset management firm.
"The earthquake is going to have a big impact on the macro economy. We are going to see soft economic data in coming months. Reconstruction demand will not come until a few months later and power shortage is likely to curtail growth."
U.S. crude oil futures were little changed at $102.34 a barrel and Brent crude also barely budged to trade at $114.93. Gold edged up to around $1,428.75 an ounce.
Anti-aircraft fire rang out across Tripoli for a third night on Monday, but air attacks on Libya are likely to slow, a U.S. general said, as Washington holds back from being sucked into the Libyan civil war.
"It now seems likely that there will be a significant loss of Libyan oil supplies for some time," said Ric Spooner, chief market analyst at CMC Markets.
"This will reduce the buffer of excess capacity and increase the oil market's vulnerability to any new supply shocks which may emerge."