A selloff in the yen paused on Tuesday as it neared 100 to the dollar, while a firm start to the U.S. corporate earnings season and a fall in Chinese inflation helped shares and commodities.
The Japanese currency touched 99.67 to the dollar in Asian trade, the greenback's strongest level versus the yen since May 2009, before the selloff ran out of steam. The euro peaked at 129.94 yen, its highest level since January 2010.
Most market players expect the halt in selling to be temporary and believe it is only a matter of time before the dollar breaks the 100 yen mark.
"It's looks inevitable and I'd say (it will break 100) within the next month, if not sooner," said Alpesh Patel, a founding principal at asset manager Praefinium Partners.
In European trading the yen's recovery left the dollar down 0.3 percent at 99.05 yen, while the euro was off 0.15 percent on the day at 129.10 yen.
"Investors have been quick to use any setback to put on new short yen positions. Everything is pointing to a weaker yen and everyone is happy to go with the flow," said Niels Christensen, currency strategist at Nordea in Copenhagen.
The dollar has still gained around 7 percent against the yen since the Bank of Japan (BOJ) unveiled a massive stimulus programme last Thursday involving large purchases of long term Japanese government bonds (JGBs).
The BOJ's bold measures have had a major impact on the world's main debt markets, sending Japanese government yields down sharply and spurring a search for higher-yielding assets, which has seen yields fall on U.S. and euro zone bonds as well.
"Markets are increasingly focused on the notion that larger JGB purchases, at longer maturities, by the BOJ could push Japanese domestic long-term investors elsewhere," said Vassili Serebriakov, strategist at BNP Paribas.
The yield on 10-year Treasury notes stood at 1.75 percent , little changed from late U.S. trade on Monday, although not far from a four-month low of 1.68 percent when markets began to price in the effect of the BOJ's plans.
German 10-year bonds were also steady at 1.24 percent having hit 1.2 percent on Friday, their lowest level since mid-2012 before European Central Bank President Mario Draghi promised to do whatever it took to save the euro.
Equity markets were being led higher by mining stocks as investors hoped for more accommodative monetary policy from China following benign inflation data, and after U.S. resources giant Alcoa posted solid earnings.
Alcoa Inc, the largest U.S. aluminium producer, kicked off U.S. earnings on Monday, reporting an increase in quarterly profit and easing concerns about corporate results in the first three months of 2013.
Europe's FTSE Eurofirst 300 index was up 0.6 percent at 1,171.75 points in morning trade. London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX were between 0.7 and 0.9 percent higher.
Earlier, the MSCI's broadest index of Asia-Pacific stocks outside Japan rose 1 percent, led by Australian shares which gained 1.4 percent on rises in blue chip financials and miners.
MSCI's world equity index, which tracks share prices in 45 countries, was up 0.3 percent with further gains likely as U.S. stock futures suggest Wall Street will open higher.
China's annual consumer inflation cooled in March as food prices eased from nine-month highs and producer price deflation deepened, data showed on Tuesday, leaving policymakers room to keep monetary conditions easy and nurture a nascent recovery.
The Chinese data underpinned demand for copper which climbed to $7,550 a tonne on the London Metal Exchange, its highest since March 28, before paring the gains to trade around $7,534 a tonne, up 1.01 percent.
LME copper prices are recovering from 8-month lows of $7,331.25 a tonne hit last week but are still down by more than 5 percent from a peak above $8,300 a tonne in early February as weak global demand leads to a surplus in supply.
Oil also gained on the Chinese data though a stalemate in talks between Iran and Western nations over its nuclear programme and rising tension on the Korean peninsula added support to prices.
North Korea has nearly closed its last major project with its southern neighbour, raising speculation it may test a nuclear weapon or a missile, in a crisis that has become one of the most serious since the Korean War ended in 1953.
U.S. oil futures were up 0.2 percent to $93.58 a barrel and Brent rose 0.4 percent to $105.08.