Volatility eased as traders focused on the world economy and corporate earning figures after a week dominated by the dramatic increase in tensions over North Korea triggered a global sell-off before prices bounced back Monday.
Calm returned to Asian markets Wednesday, with equities stabilising after a two-day rally, as the dollar strengthened on encouraging US economic data.
Volatility eased as traders focused on the world economy and corporate earning figures after a week dominated by the dramatic increase in tensions over North Korea triggered a global sell-off before prices bounced back Monday.
The greenback rose after official figures showed US consumers splurged in July, with retail data spurred by strong auto and department store sales.
However, Wall Street finished little changed as the strong statistics were offset by some disappointing earnings reports.
The Nikkei, which recovered Tuesday after finishing at its lowest level for more than three months Monday, was flat by the break, even as the weakening yen boosted exporters, while Hong Kong was higher in morning trade.
Seoul, which was closed Tuesday for a public holiday, gained ground by midday.
"Volatility declined on international markets ... with US stock markets returning to their moribund state," said Ric Spooner, an analyst at CMC Markets in Sydney.
"This has provided a neutral lead for the local market where the main focus will be on the profit reporting season."
However, Shanghai was down as traders digested a warning from the IMF Tuesday that China's massive debt is on a "dangerous" path, raising the risk of a sharp slowdown in growth.
The International Monetary Fund said the world's second largest economy must change course and press on with structural reforms, even as it maintained its forecast of 6.7 percent growth for this year.
US economy 'on track'
In the US, the retail sales data increased expectations of a December rate hike by the Federal Reserve, offering more support to the greenback's recovery after the US currency fell to eight-week lows under 109 yen at the height of the North Korea crisis last week.
"It's another sign the US economy is on the track the Fed has articulated," said Greg McKenna, an analyst at AxiTrader.
The dollar was broadly stable against the yen and euro after rising following the sales data, while sterling was struggling on figures showing inflation has been relatively muted despite the sharp post-Brexit devaluation, eroding chances of an early Bank of England rate hike.
Analysts said the greenback was also supported by North Korea tensions easing as traders cashed out of safe haven assets, but Oanda's Stephen Innes said the US unit was not out of the woods yet.
"Given that the US and South Korea have military drills scheduled for next week, which could ratchet up the disruptive rhetoric, traders may wait for the dust to further settle before over committing to the current move," he said.
On commodities markets, oil was up but US crude, which has declined almost five percent this month, was still trading below $48 a barrel.
Analysts expect more evidence of rising US shale production, seen as undermining efforts by OPEC members and their allies to cut the global oil glut.