Asian currencies gained, capping the best two-month advance since April, after reports showed factory production in Japan and South Korea beat economists' estimates and confidence among U.S. consumers reached a one-year high.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-traded currencies excluding the yen, rose 0.6 percent this month, adding to a 1.7 percent rally in January.

Overseas investors bought $6.3 billion more equities than they sold in South Korea, Taiwan and Thailand in February, helping spur a bull run in Asian stocks, identified as a 20 percent increase from the previous low.

“The market is slowly removing the risk of a hard-landing scenario as economic data are holding up well and not keeling over,” said Matthew Huang, a strategist in Singapore at Macquarie Group Ltd. “You also have an easing in Europe's funding stress, which is a risk-positive event.”

Eoin Treacy's view The Asian Dollar Index often acts as a bellwether for the Asian region. There is a rational explanation since foreign investor demand for Asian assets is reflected in the respective local currencies. The Index pulled back sharply in September and ranged below the 200-day MA until early this month. It has been consolidating in the region of the trend mean for the last four weeks and today rallied to test the recovery highs near 118. It will need to sustain a move above that area to confirm a return to medium-term demand dominance. The Singapore Dollar has a relatively similar pattern while the Taiwan Dollar and Malaysia Ringgit hit new recovery highs today.

The strong performance of various Asian currencies was reflected in regional stock markets. The Thai SET Index today joined the small number of markets to post new highs since the August correction. The Philippine Composite also rallied impressively, holding its progression of higher reaction lows. The Malaysian Kuala Lumpur Composite and the TAIEX hit new recovery highs today. The Indonesian Jakarta Composite also rallied, having retested the MA earlier this week. The Singapore STI is pressuring the lower side of the overhead top formation and the South Korean Kospi continues to hold above the psychological 2000. The Hong Kong Hang Seng remains in a consistent short-term uptrend.

There is a risk that the market has already priced in a good deal of the ECB's additional stimulus. Today's cooling of speculation that the Fed would embark on a third round of quantitative easing hit the commodity complex particularly hard. Where short-term overbought conditions exist, for example on the SET Index or Nasdaq-100, there is potential of a consolidation of recent powerful gains.