Optimism over U.S. corporate earnings gave risk appetite an added fillip, leaving the dollar and yen lower in Europe Thursday.
But sentiment wasn't that strong and currency moves were limited.
Some analysts questioned how long the positive mood could last.
"Overall risk appetite is at its highest level since before the third quarter of last year and high-yield currencies are pressing against key resistance levels," said the team at Royal Bank of Scotland Group PLC in its daily assessment of the market.
Nevertheless, optimism remains the key driver, with the market focusing on Wednesday's news that U.S. house prices rose 0.9% in April. The question now is whether existing home sales data later in the day also show some buoyancy in the housing market.
Poor results from Morgan Stanley as well as Wells Fargo & Co. helped to ensure that the Dow Jones Industrial Average ended the day 0.4% lower. But stronger-than-expected results from eBay after the close on Wall Street boosted sentiment once again and helped to give a lift to most Asian markets, with the Nikkei closing 0.7% higher.
The shift out of the more safe-haven dollar was encouraged by a report late in the day that the Central Reserve Bank of Peru could seek to lower the dollar's share of its reserves to 62% from 82%. The country has around $30 billion of reserves.
The yen, meanwhile, was coming under pressure from expectations that about Y700 billion of toshin issues could flood the market Friday. These are bonds issued in foreign currencies for Japanese buyers and indicates a growing appetite among Japanese investors for overseas assets.
The pound was the main gainer, roaring ahead on news that U.K. retail sales rose 1.2% last month and not just the 0.3% expected because of hot weather and discounting.
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