Asian shares rose to fresh eight-month highs on Wednesday, as U.S. home sales data added to optimism that the global economy is through the worst, while the dollar struggled off its latest set of lows for the year.

Oil succumbed to profit-taking after a six-day rally which took it to a seven-month high above $69 a barrel. Data showed U.S. crude inventories fell less than expected last week, but crude futures later steadied above $68 a barrel

Financial spreadbetters expected Europe to open mixed with Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI> and France's CAC-40 <.FCHI> seen starting either slightly up or slightly down.

Japan's benchmark Nikkei stock average <.N225> rose 0.4 percent, buoyed by smelters and glassmakers such as Asahi Glass <5201.T> after brokerage upgrades citing signs of hope for the global economy. <.T>

The MSCI index of Asian shares excluding Japan <.MIAPJ0000PUS>, which is now at levels not seen since the month Lehman Brothers collapsed, rose 1.3 percent and scored its latest eight-month peak.

The index has risen about 60 percent in the past three months as investor confidence has grown that the global downturn has slowed, with latest evidence coming from a surprise surge in U.S. pending homes sales.

There's been enough improvement in the global economy to say that we've put the worst-case scenario behind us, said Yutaka Miura, senior technical analyst at Mizuho Securities.

The Dow Jones industrial average <.DJI> closed up 0.2 percent on Tuesday, the Standard & Poor's 500 Index <.SPX> rose 0.2 percent and the Nasdaq Composite Index <.IXIC> gained 0.4 percent. <.N>

Analysts remained cautious about the strength of the economic foundations for the three-month long rally in shares and higher yielding currencies and markets were awaiting U.S. data later that includes factory orders, a non-manufacturing index and a private employment report.

We need still more proof that things are really improving, Miura said.

South Korean shares <.KS11> edged up 0.1 percent, helped by shipbuilders, but KB Financial Group <105560.KS>, parent of top bank Kookmin, fell after it said it might sell new shares to raise capital.

Hong Kong's Hang Seng index <.HSI> rose 2.3 percent as bulk shippers gained following a jump in the Baltic Dry Index <.BADI>, a key gauge for measuring changes in sea freight.

AUSTRALIA AVOIDS RECESSION

Indonesia cut rates by 25 basis points to 7 percent to support ailing growth, while in Australia gross domestic product data showed the economy expanded 0.4 percent in the first quarter, confounding fears of it falling into recession.

We've dodged the recession bullet for the time being, said Michael Blythe, chief economist at Commonwealth Bank.

The data helped Australian shares to their highest in seven months, with the index <.AXJO> up 1.6 percent.

The Australian dollar rose 0.6 percent on the day to $0.8260 and hit its highest since late September.

The dollar has been the prime loser in the risk-taking rally that has stoked multi-month peaks in major currencies as investors gained the confidence to branch out into markets other than safe-haven dollar-based ones.

The greenback hit its weakest level this year against a basket of six major currencies <.DXY> on Tuesday and was hovering within a whisker of that level on Wednesday.

The euro softened to $1.4290 after hitting a 2009 high of $1.4332 on electronic trading platform EBS the previous day.

The dollar held its own at 96.00 yen but weakened past $1.6600 to the pound for the first time since October.

Federal Reserve Chairman Ben Bernanke testifies before the House of Representatives Budget Committee at 1400 GMT and the market is waiting for clues on whether the Fed will increase purchases of Treasuries to keep down long-term interest rates.

The benchmark 10-year Treasury note yield has risen about 100 basis points to 3.61 percent since the Fed said in March it would buy $300 billion in government bonds and analysts say rising yields could eventually lead to higher mortgage rates.

The rise in Treasury yields has pressured Japanese government bond yields in recent weeks. Gains in Tokyo shares as well as worries about debt supply in Japan saw the benchmark 10-year bond yield touch 1.545 percent, its highest since October.

Gold rose above $985 per ounce, with the weaker dollar supporting demand for bullion as a hedge against deterioration of dollar-denominated portfolios. It hit a three-month high above $988 on Monday.

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