Asian stocks rose to three-week highs on Thursday as Indian shares and the rupee rallied a day after the country's new central bank chief unveiled a raft of measures to support the currency and banking sector.
But worries the U.S. Federal Reserve will soon scale back stimulus kept markets in check. MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.7 percent, reaching highs not seen since Aug. 19.
India's benchmark BSE index put on 3 percent, South Korea's KOSPI rose 1.0 percent, while Thai stocks gained 0.9 percent.
Tokyo's Nikkei was flat, taking a bit of a breather after stretching to a one-month peak. It has climbed about 5 percent so far this week.
The moves followed a second day of gains on Wall Street spurred by another set of upbeat U.S. data, though the figures have also added to the chance of the Fed tapering its stimulus programme.
"Strong car sales in the U.S. has again lifted market confidence in its economy, and it lifted expectations that the U.S. Federal Reserve will start cutting back its stimulus this month," said Isao Kubo, an equity strategist at Nissay Asset Management. "There is a sense of caution in the market."
Markets appeared to have cast aside worries about Syria for the moment even as a possible U.S. military strike moved one step closer after a Senate committee voted in favour of action. This has cleared the way for a vote in the full Senate, likely next week.
CENTRAL BANK FOCUS
Former IMF chief economist Raghuram Rajan took over the helm at the Reserve Bank of India in grand style on Wednesday, announcing a raft of steps to liberalise financial markets and the banking sector.
The rupee traded at 65.95 per U.S. dollar, pulling well away from a record low around 68.85 set last week.
As expected, the Bank of Japan maintained its massive monetary stimulus launched in April and revised up its outlook for the economy following a two-day review. Governor Haruhiko Kuroda will give a media briefing later in the day.
The European Central Bank takes centre stage next, although it is widely seen keeping rates low for an "extended period".
U.S. data on Wednesday showed auto sales raced past expectations in August, ahead of the closely-watched payrolls data on Friday, extending a string of upbeat U.S. data that has reinforced expectations the Fed will soon start to pull back support.
Such expectations have underpinned the U.S. dollar, although a bit of profit-taking has emerged, knocking the greenback off a six-week high against a basket of major currencies.
That saw the euro back near $1.3190, pulling away from a six-week trough of $1.3138 plumbed earlier this week.
Against the yen, the dollar held near a one-month high of 99.86 set on Tuesday, while the euro traded near a two-week peak around 131.81 reached overnight.
Among commodities, Brent crude oil added 29 cents to $115.30 a barrel while copper futures firmed a touch to $7,128.50 a tonne.
India, along with many emerging markets, has also been hit hard by an outflow of funds as international investors positioned for a world with less central bank support.
The IMF, in a note prepared for the Group of 20 meeting in St. Petersburg, warned that emerging countries were particularly vulnerable to a tightening of U.S. monetary policy.
It urged strengthened global action to revitalise growth and better manage risks, adding some downside risks have become more prominent.