The dollar marked a fresh seven-year high against the yen on Wednesday, which helped lift the Nikkei to a similar record, while oil prices recovered after data showed a drop in US supply.

MSCI's broadest index of Asia-Pacific shares outside Japan edged slightly down, while Japan's Nikkei stock average was up about 0.8 per cent after earlier touching its highest level since July 2007.

A pair of surveys showed that China's services sector grew slightly faster in November, though they did not vanquish fears about a softening Chinese economy.

"Downside pressures on the economy still persist," said Qu Hongbin, an economist at HSBC in Hong Kong, adding that he expected further policy easing in coming weeks.

Wall Street

Wall Street posted solid gains on Tuesday, with the Dow Jones industrial average closing at a record high, boosted by gains in energy shares as investors searched for bargains in the sector.

US crude

US crude was up more than 1 per cent to $67.76 a barrel in early Asian trading, after industry group American Petroleum Institute (API) released data showing US crude stocks fell 6.5 million barrels last week.

In recently volatile trade amid massive oversupply, US crude tumbled on Tuesday after rising 4 per cent on Monday, its biggest gain since August 2012.

Saudi Arabia would only consider cutting production if other countries, including non-OPEC producer Russia, joined in limits, former Saudi intelligence chief Prince Turki bin Faisal had said on Tuesday.

US economy

While economists fear the sharp drop in global energy prices could fan deflationary pressures in some countries, both New York Fed President William Dudley and Vice Chair Stanley Fischer this week both painted a mostly rosy outlook for the US economy and welcomed the cheaper oil.

“Both were relatively optimistic on the US economy and went out of their way to stress upside benefits to US economy of weaker oil prices,’’ Steven Englander, global head of G10 foreign exchange strategy at CitiFX, said in a note.

“All of this is extremely positive for USD, given that fed funds has priced in an extremely flat policy hike path and the USD looks extremely sensitive to interest rate differentials in the current environment,’’ he added.

US Treasury yields

Rising Treasury yields added to the appeal of the US dollar on Wednesday. The benchmark 10-year Treasury yield ticked up to 2.292 per cent in Asian trade, up from its US close of 2.285 percent.

The greenback was steady at 119.23 yen, not far from its Tuesday high of 119.29, that was its strongest level since August 2007, when it rose as high as 119.84.

The euro was flat on the day at $1.2385.

The dollar's recent strength has weighed on spot gold which dipped 0.2 per cent to $1,196.30 an ounce on Wednesday.

comment COMMENT NOW