U.S. Treasury prices edged up on Thursday as bargain hunters entered the fray after a violent two-day surge in yields, pulling the dollar lower, while Asian stocks rose on hopes added fiscal stimulus will help the U.S. economy in the near term.

In stark contrast to the jobless U.S. recovery that the White House is trying to shore up with tax cuts, Australia's jobs growth in November was the biggest since January, blowing past forecasts and lifting the Australian dollar and domestic shares.

The financial world is becoming split between investors who are deeply concerned a proposal from U.S. President Barack Obama to extend tax cuts will worsen a budget shortfall, and investors who are relieved U.S. authorities are trying to use fiscal and monetary medicine for the economy.

Both higher U.S. yields and higher growth are being seen as supportive for the dollar, for now.

The stimulus measures agreed by the U.S. administration will likely lead to many analysts penciling in higher growth forecasts over 2011 whilst reducing the prospects of QE3 from taking place, all of which is dollar positive, Mitul Kotecha, global head of foreign exchange strategy with Credit Agricole CIB in Hong Kong, said in a note.

The lead 10-year U.S. Treasury future was up around 9/32 in early Asian trade, after hitting the lowest since June 25 overnight. Even after the Federal Reserve's highly anticipated plan to buy more bonds to push down interest rates was hatched in early November, the bond market has relentlessly sold mid to longer-maturity bonds.

Since November, the difference between 10-year yields and 2-year yields has widened by nearly 40 basis points.

In the cash market, the benchmark 10-year yield was at 3.22 percent after climbing to 3.33 percent on Wednesday, the highest since June.

The poor performance of sovereign bond markets in the fourth quarter made much worse this week has become a question of allocation for many investors. Bob Doll, chief investment strategist at BlackRock, told the Reuters 2011 Investment Outlook Summit the deal in Washington to extend tax cuts will probably accelerate the move of cash into equities and out of fixed income.

The U.S. dollar has benefited from the rapid pace of rising Treasury yields relative to other sovereign bonds. The move lower in U.S. yields on Thursday pushed down the dollar index, a gauge of performance against six other major currencies, 0.33 percent.

The Australian dollar rose 0.7 percent to $0.9863 after employment increased by a net 54,600 jobs last month, surpassing expectations of a 19,000 gain.

Interbank rate futures tumbled while Australian government bond futures fell, unlike other sovereigns on the day.

In stock markets, Japan's Nikkei share average hit a seven-month high though short-term measures showed the market was due for a pause, having risen 12 percent since November compared with the 6 percent advance in the MSCI all-country world index <.MIWD00000PUS>.

Thanks to both the yen's weakness and Nikkei futures ending higher in Chicago, the Nikkei may see more buying, but the market has been overbought, said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets.

Foreign investors gobbled up Japanese stocks last week, with net buying reaching the highest since early April, Finance Ministry data showed. Foreigners have been net buyers for 5 straight weeks, bringing the total net buying to 730.6 billion yen over the period. Out of the last 10 weeks foreigners were net buyers in nine weeks.

The MSCI index of Asia Pacific stocks outside Japan rose 1.1 percent <.MIAPJ0000PUS>, with gains spread evenly across all sectors.

(Additional reporting by Chikafumi Hodo and Ayai Tomisawa in TOKYO, editing by Kazunori Takada)

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