Hong Kong stocks were on course to end the Year of the Rooster leading a rally across Asian markets, extending a rebound Thursday from last week's turmoil, as investors tracked a strong lead from Wall Street.
A key US inflation reading showed prices shot up in January, sending Treasury yields rising and fanning expectations the Federal Reserve will hike interest rates at a sharper pace then expected a few months ago.
However while the news initially sent US equities tumbling, they soon recovered and all three main indexes on Wall Street finished at least one percent higher, with dealers soothed by a surprisingly heavy drop in retail sales that eased inflation fears.
Global markets went into a tailspin last week on rising T-Bill rates and the prospect of higher borrowing costs caused by a resurgent US economy and improving wages.
But this week has seen a recovery, though there remains an element of caution as analysts warn of further turmoil after a stellar 2018 and January that saw several record and multi-year highs hit.
As traders headed into the Chinese New Year break, Hong Kong was 1.6 percent higher, having climbed around 3.5 percent over the previous two days. However, it still has some ground to make up after last week's more than nine percent drop.
Tokyo ended the morning 1.3 percent higher, despite a surge in the yen against the dollar, which tends to hurt exporters.
Sydney rose 0.9 percent, Singapore was up 0.8 percent and Wellington added 0.2 percent while Kuala Lumpur and Jakarta were also up.
Shanghai, Seoul, Taipei are closed for the Lunar New Year.
- Dollar takes a hit -
Stephen Innes, head of Asia-Pacific trading at OANDA, said: "In seemingly absurd fashion, US equity investors ignored the inflationary signals and focused on weaker-than-expected US retail sales report.
"There is an increasing possibility that (incoming Fed boss Jerome) Powell may blink and the Fed will be more hesitant to guide monetary policy given the waning growth narrative.
On currency markets the dollar is taking a hit across the board, with the yen at fresh 15-month highs, while the euro built on Wednesday's gains that came after figures showed solid German economic growth.
The greenback is coming under the cosh despite the strong inflation print.
"I'm not going to pretend I have a clue this morning," said Greg McKenna, chief market strategist at AxiTrader.
"Stocks have surged and the US dollar has been poleaxed. That's even though the market expectations of a March hike increased."
The dollar was also sharply down against most high-yielding units, including the Australian dollar, South Korean won, Indonesian rupiah and Thai baht.
The South African rand is around a three-year high after Jacob Zuma resigned as president, as the ruling ANC party finally turned against him after nine years of corruption scandals, economic slowdown and falling popularity.
Commodities were buoyed by the weakening dollar as it makes them cheaper for holders of other currencies.
Both main oil contracts extended Wednesday's surge, with help also coming from suggestions by Saudi Arabia's energy minister that key producers in OPEC and Russia would maintain caps on output.
Gold rose 1.6 percent Thursday, to sit at three-week highs around $1,353.
- Key figures around 0230 GMT -
Tokyo - Nikkei 225: UP 1.3 percent at 21,434.63 (break)
Hong Kong - Hang Seng: UP 1.6 percent at 31,017.08
Shanghai - Composite: Closed for a public holiday
Euro/dollar: UP at $1.2464 from $1.2457 at 2140 GMT
Pound/dollar: UP at $1.4012 from $1.4006
Dollar/yen: DOWN at 106.62 yen from 106.98 yen
Oil - West Texas Intermediate: UP 37 cents at $60.37 per barrel
Oil - Brent North Sea: UP 26 cents at $64.62 per barrel
New York - DOW: UP 1.0 percent at 24,893.49 (close)
London - FTSE 100: UP 0.6 percent at 7,213.97 (close)