Asian shares recovered on Wednesday as solid euro zone data calmed nerves jarred by potential political turmoil derailing the region's efforts to resolve its debt crisis, while the prospect of a dovish new governor for the Bank of Japan weakened the yen.
The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS inched up 0.3 percent after falling 0.8 percent the day before.
As prices approached their highs, trade became choppy as investors sought to book profits, but analysts and traders say any dip was likely to be seen as a chance to buy back into the market. The pan-Asian index scaled a 18-month high on Monday.
Australian shares .AXJO jumped 0.8 percent and South Korean shares .KS11 opened up 0.3 percent after slipping for a fourth straight day to a two-month closing low on Tuesday.
Data showed on Tuesday the vast U.S. services sector extended a three-year expansion in January, while business activity in the euro zone, Markit's euro zone composite PMI, climbed to a 10-month high in January.
The Standard & Poor's 500 Index .SPX and the Nasdaq Composite Index .IXIC gained over 1 percent, recouping most of their losses after a sharp sell-off the previous session.
Japan's benchmark Nikkei stock average .N225 opened up 1.7 percent after closing down 1.9 percent to snap a five-day winning streak the day before. Nikkei hit a 33-month high on Monday. .T
Yen selling resumed after Bank of Japan Governor Masaaki Shirakawa said he would step down on March 19, three weeks earlier than the official end of his five-year term, leaving at the same time as his two deputies, and raising the prospect that the next BOJ governor will more readily adopt the expansionist monetary policy demanded by Prime Minister Shinzo Abe.
"The Bank of Japan is about to get a lot more dovish, and sooner than previously thought," said Christopher Vecchio, a currency analyst at DailyFX.
Early on Wednesday, the dollar touched 93.79 yen to its highest since May 2010, while the euro also rose to 127.43 yen, its loftiest since April 2010. The Aussie reached a 4-1/2 year peak around 97.42 yen. The pound touched a 3-year high near 147.25 yen.
The euro drew support from growing confidence in the region's economy and improving funding conditions for deeply-indebted euro zone members.
News the European Central Bank's balance sheet fell to an 11-month low of 2.8 trillion euros ($3.8 trillion) as markets unwound some of the ECB's crisis funding measures underpinned the euro, coming as it does in stark contrast to the U.S. Federal Reserve and the BOJ which keep expanding asset buying.
"Flows matter more than stock in currency markets when comparing central bank balance sheets...highlighting the euro's outperformance over the last few months," said Ashraf Laidi, chief global strategist at City Index, in a note to clients.
The euro was steady at $1.3578, still below Friday's 14-1/2-month peak of $1.3711, but above a key technical support of its 14-day moving average at $1.34653.
The ECB is expected to keep interest rates unchanged at its policy meeting on Thursday, but its president may face a grilling over an Italian banking scandal.
Spanish and Italian yields fell on Tuesday after jumping on worries over a corruption scandal in Spain and polls showing Italy's former prime minister Silvio Berlusconi regaining ground before elections this month.
Brent crude hit a 20-week high on Tuesday on heightening demand prospects after positive economic data and strong corporate earnings reports. U.S. crude was barely changed at $96.65 a barrel.