Asian shares climbed to their highest level in seven months on Tuesday on fresh hopes the global recession is easing, and oil hovered at six-month peaks as supply concerns helped buoy up prices.

The dollar struggled, as did the yen, after both tumbled the previous day when a 3 per cent gain in US shares boosted investor confidence that the global downturn may be slowing, encouraging buying in commodity currencies and other majors.

In Tokyo, the benchmark Nikkei average rose 2.8 per cent, with exporters such as Canon Inc helped by the yen's retreat after a top finance ministry official gave a warning about recent yen strength and its impact on the economy.

But analysts were cautious ahead of data on Japan's gross domestic product on Wednesday, which is forecast to show the world's second-largest economy contracted 4.2 per cent in January to March, likely its worst quarterly contraction since World War II.

'Nobody really wants to take on new risk ahead of this,' said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

'At the same time, there's a bit of risk from currency movements, and while the dollar recovered yesterday against the yen on a Japanese official's comments amounting to verbal intervention, these gains are shaky.'

US stocks rallied on Monday as better-than-expected results from the No. 2 US home improvement retailer, Lowe's Cos Inc, helped spark broad-based buying on hopes consumer spending is stabilising. A revival in badly battered US consumer confidence is key to a broader global recovery.

The Dow Jones industrial average gained 2.85 per cent to 8,504.08, the Standard & Poor's 500 Index rose 3.04 per cent to 909.71 and the Nasdaq Composite Index advanced 3.11 per cent.

S&P futures were steady in Asian trade.

Positive but cautious

Officials at the World Bank, European Central Bank and US Treasury also offered cautiously upbeat comments, with Treasury Secretary Timothy Geithner saying the US economy had 'clearly stabilised' although he warned things would remain 'bumpy'.

The MSCI index of Asian stocks outside Japan hit its highest since October, although India's main stock index slipped after soaring more than 17 per cent on Monday as investors cheered a decisive election victory by the ruling coalition, which could open the way for more economic reforms.

Miners including BHP Billiton helped lift Australian shares by 2 per cent, while energy stocks in Hong Kong soared after a jump of nearly 5 per cent in crude prices on Monday.

Oil prices steadied around $59 a barrel on Tuesday after climbing on concerns about supply following unrest in Nigeria, where militants threaten to disrupt crude exports, and following a fire in a key US refinery.

The dollar, which hit a two-month low of 94.55 yen on Monday before rebounding more than 1 per cent, rose a further 0.1 per cent to 96.40 yen but lost ground to the Australian dollar edging back towards a recent seven-month low.

The Australian dollar also stood within sight of a recent seven-month peak on the yen, underpinned after Reserve Bank of Australia Governor Glenn Stevens said domestic interest rates were 'pretty low' but then also cautioned against expectations for a quick recovery.

'The yen remains vulnerable as firmness in stocks bolster risk appetite, with people encouraged to buy higher-yielding currencies such as the Australian dollar against the yen,' Tsutomu Soma, a senior manager at Okasan Securities in Tokyo.

The euro and sterling also held on to gains made against both the dollar and yen the previous day, with sterling edging towards its highest since early January against the dollar.

Debt prices retreated with the yield on the benchmark 10-year Japanese government bond edging up 1 basis point to 1.410 per cent and the f