TOKYO (REUTERS) - Asian shares erased early modest losses and pushed to a fresh record high, while the euro remained within sight of a three-year peak on rising expectations that the European Central Bank could pare its monetary stimulus.
European stock futures were flat, suggesting a more subdued opening for the region. DAX futures were up 0.1 per cent, and FTSE futures and CAC each up 0.2 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.5 per cent, extending record highs set in the previous session.
US markets were closed for a public holiday on Monday (Jan 15).
But Australian shares slipped 0.5 per cent, as miners were pressured by weaker Chinese iron ore prices. The materials and mining index dropped as much as 0.8 per cent, with mining giants BHP Billiton and Rio Tinto each falling over 1 per cent before ending off lows.
Chinese iron ore futures edged up after tumbling 2 per cent on Monday, when stockpiles of the steelmaking commodity at China's ports surged to the highest since at least 2004.
Japan's Nikkei stock index rallied 1 per cent after touching its highest intraday level since November 1991 as the yen's recent surge took a breather, with expectations for strong corporate earnings underpinning sentiment.
"The yen's appreciation against the dollar has stopped and this brightened sentiment, along with expectations for robust company quarterly results," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
The euro edged up slightly to US$1.2270, within sight of its Monday high of US$1.2296, its loftiest peak since December 2014.
The euro had blipped higher on Monday and German benchmark bond yields hit session highs after European Central Bank rate-setter Ardo Hansson said the central bank could end its bond purchase scheme in one go after September if the economy and inflation develop as expected.
Adding to the euro's ascent, data showed the trade surplus in the 19-country euro area rose to its highest level in eight months, indicating companies were so far weathering the impact of a stronger currency.
The dollar index, which gauges the US currency against a basket of six major rivals, wallowed at more than three-year lows. It was last at 90.456, after dropping as low as 90.279 on Monday, its deepest nadir since December 2014.
Against the yen, the dollar clawed back some lost ground, adding 0.3 per cent to 110.82. It fell as low as 110.32 yen on Monday, which was its weakest level since Sept 15.
Japanese Finance Minister Taro Aso said on Tuesday that he did not see problems with the dollar weakening to around 110.80 yen, but that big swings in currencies would be problematic.
"The dollar's problems began last week, when investors sold the dollar on expectations that the Bank of Japan might begin to taper its stimulus," said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.
"It then continued as the euro rose on suggestions that the ECB would take further normalisation steps, showing how sensitive markets are to perceived signals from central banks," he said.
Crude oil prices were mixed after rising to their highest levels since December 2014, helped by the dollar's recent weakness as well as signs that production cuts by Opec and Russia are tightening supplies.
Brent crude futures were down 30 cents, or 0.4 per cent, at US$69.96 a barrel after touching a high of US$70.37 a barrel on Monday.
US crude futures were up 19 cents, or 0.3 per cent, at US$64.49 a barrel.