Asian shares pushed higher on Tuesday on the back of rising U.S. manufacturing output and a jump in euro zone business activity, ahead of a key U.S. Federal Reserve policy decision later this week.
Investors are on tenterhooks over when the Fed will start to reduce its $85 billion-a-month bond-buying programme, a major driver of global risk assets in recent years.
A majority of economists expect the taper to happen in March, but a recent run of upbeat economic data has steadily shortened the odds on an announcement at this week's two-day meeting concluding on Wednesday -- or in January.
"Although we have heavier odds pinned on the tapering being announced in January, we think the economic case has already been made for pulling the trigger," analysts at Societe Generale wrote in a note.
"The only reason to delay would be to give the FOMC the opportunity to strongly signal its intent to taper in January. In either case -- actual taper or signal of impending taper -- we expect the 10-year U.S. Treasury yield to test 2.9 percent and the curve to bear steepen."
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent, facing resistance at its 200-day moving average. The index hit a three-month intraday low in the previous session.
In Tokyo, the Nikkei share average climbed 0.9 percent, rebounding from a 3-1/2 week closing low on Monday.
"With signs of recovery worldwide and stronger economic data, optimism has seemingly returned ahead of the key U.S. Federal Reserve decision," said Tracey Warren, business development manager at CMC Markets stockbroking.
Overnight, U.S. stocks rose, having posted their worst week since August on Friday, after manufacturing output increased for a fourth straight month in November, suggesting the economy is gaining momentum. U.S. S&P E-mini futures dipped 0.1 percent in Asian trade on Tuesday.
Yields on benchmark 10-year U.S. Treasuries ended 11 basis points higher at 2.8793 percent on Monday, not far from a three-month high of 2.932 percent set on December 6.
Asset returns in 2013: link.reuters.com/dub25t
Euro zone flash PMIs: link.reuters.com/cuh64s
The pick-up in euro zone business activity boosted the common currency. It stood at $1.3760, having risen to as high as $1.3800 in the previous session, within sight of a seven-week high of $1.3811 reached last week.
The dollar pulled back further against the yen from a five-year high set on Friday. The greenback was at 103.05 yen after easing 0.3 percent on Monday.
The Australian dollar was little changed after the Reserve Bank of Australia said there have been further signs that past cuts in interest rates are working to stimulate the economy, though it again would not rule out the chance of easing further if needed.
The Aussie dollar was traded at $0.8945, though it was still near a 3-1/2 month low of $0.8909 set on Friday.
Among commodities, U.S. crude prices eased 0.1 percent to about $97.35 a barrel, giving up some of the previous session's 0.7 percent rise.
Gold took a pause after rising for two straight days. It stood at around $1,240 an ounce on Tuesday.