Asian stock market rose to their highest in two and a half months on Tuesday, boosted by solid U.S. housing data, while the euro inched up towards two-month peaks on relief over stress tests on European banks.
High-yielding currencies like the Australian and New Zealand dollars held near recent highs and the dollar stabilised after retreating against the yen on Monday.
"The environment is gradually improving, after U.S. new home sales data and European banks' stress tests, but investors are still not entirely convinced that the recovery is solid," said Soichiro Monji, chief strategist at Daiwa SB Investments.
"The yen has yet to weaken properly either."
The dollar was trading just below 87 yen after falling 0.7 percent in the previous session.
The euro crawled up above key resistance of 1.30 with sentiment buoyed after the stress tests. Analysts are now eyeing a 2-month high of $1.3029 hit last week as the next test.
The MSCI index of Asia Pacific ex-Japan stocks was up 0.4 percent, led by gains in the technology and consumer durables sectors.