The dollar extended losses in Asia while equities rallied after the head of the Federal Reserve hinted at a softer pace of interest rate hikes, though investors remain wary about the weekend's crunch trade talks between Donald Trump and Xi Jinping.
US markets were sent soaring Wednesday after Fed chief Jerome Powell said borrowing costs were still historically low but only "just below" the neutral level, a rate that neither stimulates nor restrains the economy.
While the central bank is widely expected to lift rates, his comment was a far cry from his characterisation last month of them being "a long way from neutral".
The fear of higher US interest rates -- fuelled by a surging economy -- has been a key driver of a global equity sell-off over the past few months, while the dollar has soared as traders put cash into the US looking for better, safer returns.
Observers said the remarks provided some much-needed cheer ahead of the festive period.
"Powell's dovish pivot reduces nagging concerns about vigorous interest rate hikes while providing the market with one of the best holiday gifts, a significant bounce in global equity markets," said Stephen Innes, head of Asia-Pacific trade at OANDA.
The dollar was down against its major peers as well as high-yielding and emerging market currencies, which have suffered a painful 2018. The pound even managed to strengthen despite warnings about the dire consequences of a no-deal Brexit from the Bank of England.
Among the big winners, the South African rand and Mexican peso each climbed more than one percent, Indonesia's rupiah was 0.9 percent up and Australia's dollar jumped 0.8 percent.
'Too early to call Santa rally'
Asian equities tracked a rally in New York, where the Dow and S&P 500 surged more than two percent while the tech-rich Nasdaq piled on three percent.
Hong Kong and Shanghai each rose 0.4 percent in early trade while Tokyo was 0.9 percent higher going into the break.
Sydney added 0.5 percent, Singapore rallied one percent and Seoul was up 0.8 percent, with Wellington, Manila, jakarta and Taipei also registering strong gains.
Powell is "taking away the concern about aggressive interest-rate increases, which resolves one of the issues that hung over the markets during the last couple of months", Bob Phillips, at Spectrum Management Group, said.
"We still have the trade war issue with China and we'll see how that works out this week. If that comes out positive, we'll have a decent rally at the end of the year."
The meeting between the leaders of the world's top two economies is being watched with trepidation following a series of mixed signals from Washington.
In the latest development ahead of Saturday's talks at the G20 in Buenos Aires, US Trade Representative Robert Lighthizer said Beijing had failed to offer "meaningful reform" on its trade policies that he says hurts US jobs.
Taking aim at "China's aggressive, state-directed industrial policies", Lighthizer also threatened tariffs on Chinese autos.
His comments come a day after top White House advisor Larry Kudlow told journalists Trump "said there's a good possibility we can make a deal" and two days after the president warned of more levies if he and Xi do not reach an agreement.
"While global equity markets are revelling in the afterglow of (Powell's comments), in the wake of US Trade Representative Lightizer's statement... it's far too early to suggest that a Santa Claus rally is in the cards," said Innes.
Both main oil contracts edged up but remain under pressure at 13-month lows after Wednesday's plunge of about 1.5 percent, which was fuelled by a tenth straight weekly increase in US stockpiles, adding to fears of a supply overhang.
Key figures around 0230 GMT
Tokyo - Nikkei 225: UP 0.9 percent at 22,378.46 (break)
Hong Kong - Hang Seng: UP 0.4 percent at 26,777.21
Shanghai - Composite: UP 0.4 percent at 2,611.43
Pound/dollar: UP at $1.2830 from $1.2824 at 2140 GMT
Euro/pound: UP at 88.64 pence from 88.61 pence
Euro/dollar: DOWN at $1.1371 from $1.1369
Dollar/yen: DOWN at 113.55 yen from 113.65
Oil - West Texas Intermediate: UP 30 cents at $50.59
Oil - Brent Crude: UP 10 cents at $58.86 per barrel
New York - Dow Jones: UP 2.5 percent at 25,366.43 (close)
London - FTSE 100: DOWN 0.2 percent at 7,004.52 (close)