Asian stocks Rise Alongside Wall Street amid Debt Ceiling Optimism

Asia-Pacific stock indexes rallied on Thursday, following Wall Street's lead, and the dollar held just below a two-month high versus the yen amid signs the US is close to a deal to raise the debt ceiling and avoid a disastrous default.

President Joe Biden and top U.S. congressional Republican Kevin McCarthy emphasised their determination to reach an agreement soon on Wednesday, promising to negotiate directly on a deal amid reports that the Treasury could run out of money by the beginning of June.

"A deal could be reached by the end of the week," McCarthy told reporters. "It's not that difficult to reach an agreement."

As investors drew comfort from that reassurance, MSCI's broadest index of Asia-Pacific shares pushed 0.78 per cent higher.

"Markets have chosen to be optimistic," wrote Rodrigo Catril, senior FX strategist at National Australia Bank in a client note.

"Of course, history tells us that a deal is more likely than not to be reached at the 11th hour, suggesting there is still room for a few bad headlines," he added, noting that "Treasury has almost exhausted all of its authorised extraordinary measures to keep paying the bills."

The Nikkei 225 continued to outperform the rest of the region, surging to a new 20-month high of 30,667.13, before closing 1.2 percent higher at around 30,450. Any increase above 30,795.78 would bring it to the highest level since 1990, when Japan's bubble economy was still bursting.

Hong Kong's Hang Seng gained 0.93 per cent. Mainland blue chips rose 0.37 per cent.

Australia's stock benchmark rose 0.59 percent, helped by domestic data showing an unexpected drop in employment in April, which relieved some pressure on the Reserve Bank to tighten further.

The Australian dollar, on the other hand, suffered, falling from a small gain to a loss of up to 0.44 percent following the jobs report.

Long-term US Treasury yields fell in Tokyo after reaching their highest level since March 1 at 3.589 percent in New York.

The dollar clung close to a 5 1/2-month high above 7 yuan in offshore trading after topping the closely watched level on Wednesday.

The Chinese currency is also under pressure from a string of weak data that suggested Asia's biggest economy may have already passed the peak of its post-COVID recovery.

Gold found its feet around $1,984 per ounce after dipping to a three-week low of $1,974.30 in the previous session.

Oil eased a little after Wednesday's $2 rallies for both Brent and West Texas Intermediate (WTI) crude.

Brent crude futures slipped 24 cents to $76.72 a barrel. U.S. West Texas Intermediate crude retreated 21 cents to $72.62.