Asian shares edged to a two-week high on Tuesday, adding to the previous day's hefty gains on China's economic reform plans, while the dollar was hobbled by expectations the U.S. Federal Reserve will keep its stimulus a little longer.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 percent, building on Monday's 1.4 percent rally fed by a sharp jump in Chinese stocks and heading for a fourth straight day of gains.
"China's reform pledge was sexier than perceived, bringing risk back into play in emerging markets including South Korea which is still comparably low valued," said Kim Yong-goo, a market analyst at Samsung Securities.
China's CSI300 Index surged 3.3 percent on Monday, its biggest one-day rise in two months, to hit a four-week peak. The index took a breather on Tuesday, slipping 0.4.
In Tokyo, the Nikkei fell 0.8 percent, further moving away from a six-month high hit on Friday, with a trader saying domestic investors continued to cash in recent gains.
The yen was up 0.4 percent at 99.64 yen to the dollar , adding to a 0.2 percent rise overnight to end a two-day run of losses.
The euro rose 0.1 percent to $1.3515, not far from a two-week high of $1.3542 reached on Monday. Against a basket of major currencies, the dollar eased 0.2 percent to 80.661, languishing near a more than one-week low of 80.565 reached on Monday.
As the dollar weakened on expectations that the Fed will continue its bond-buying campaign under incoming chief Janet Yellen, the 10-year U.S. Treasuries yield slipped to below 2.70 percent.
Investors remained on guard for any clues as to when the U.S. central bank will start unwinding its $85 billion-a-month stimulus programme, although many in the markets now see any move unlikely until March.
A number of Fed speakers offered more insights into the central bank's stimulus on Monday. The latest was Charles Plosser, president of the Philadelphia Fed, who said improved economic and labour market conditions suggest the Fed should set a fixed dollar amount on its current bond-buying programme and end the programme when that amount is reached.
William Dudley, the president of the Federal Reserve Bank of New York, said he was becoming "more hopeful" about the U.S. economy.
Investors will turn more cautious early next year as they try to front-run when the Fed will start unwinding its stimulus, said Evan Lucas, market strategist at IG in Melbourne.
"The markets will start to front run the Fed like they did in August leading into the September meeting," he wrote in a note. "Come late January I suspect there will be a change of sentiment from fund managers and hedge funds alike as they start to predict the end and that will affect the current run."
When that happens, emerging assets would likely come under pressure after being buoyed by cheap money from central banks over the past few years.
The Indonesian rupiah was up 0.2 percent at 11,600 per dollar on Tuesday, still not far from a 4-1/2 year low of 11,670 touched last week.
Overnight, U.S. stocks were mixed. The Standard & Poor's 500 ended lower while the Dow Jones industrial average eked out a slight gain but failed to close above its milestone level of 16,000, as stocks sold off late in the session after cautious comments by activist investor Carl Ichan on the equities market.
U.S. S&P 500 E-mini futures were little changed in Asian trade.
Among commodities, U.S. crude prices held steady at about $93 a barrel, having fallen 0.9 percent overnight to near a 5-1/2 month low of $92.51 touched last Thursday.
Gold stabilised at around $1,273 an ounce after sliding 1.2 percent in the previous session.