A 5 percent surge in Japan's Nikkei average led a charge in Asian stocks on Friday, propelled by increasing confidence in the financial sector stemming from hopes that large U.S. banks will survive without a government takeover and may even profit, reported Reuters.
The Swiss franc fell to a near three-month low against the euro after its biggest ever one-day drop against the single currency on Thursday on news the Swiss National Bank sold francs to halt deflation, a move that left some analysts wondering if this was the first shot in a currency war for trade competitiveness.
Citigroup Inc (C.N) told Reuters the bank does not need any more emergency cash from Washington and expects to stay private, while Bank of America (BAC.N) said it was profitable in January and February, easing fears about further instability in the banking industry and sparking a rush back into equities.
"The economic situation seems to be better than what people were saying at the beginning of the year -- a view that has come about now that it seems that U.S. banks' earnings may not be atrocious," said Masaru Hamasaki, senior strategist at Toyota Asset Management in Tokyo.
Yet for every piece of news that improved investor confidence, there was another that left questions about the sustainability of the market rebound.
For example, Wall Street chalked up its best three-day run since November after Standard & Poor's raised its outlook on General Electric Co's (GE.N) credit ratings to stable from negative, though it stripped the company of its "AAA" status.
On the other hand, Berkshire Hathaway (BRKa.N), Warren Buffet's conglomerate, lost its AAA rating and has a negative outlook from Fitch Ratings.
Tokyo's Nikkei .N225 led the charge in Asia, climbing 4.9 percent, and was well on its way to the biggest weekly gain of the year. Shares of large Japanese banks were outperformers, with Mitsubishi UFJ Financial Group (8306.T) up more than 6 percent.
The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS rose 3.1 percent, maintaining this week's up trend and hitting its highest level in about two weeks.
The materials and financial sectors were the biggest boosts.
Bank stocks were also the prime movers behind the 3.8 percent rise in Hong Kong's Hang Seng index .HSI. HSBC (0005.HK) rose 3.7 percent, as investors bought back the beaten down shares after an $18 billion rights issue.
Comments from Bank of America, Citigroup and JPMorgan this week have put downward pressure on the most widely watched gauge of market volatility, the Chicago Board Options Exchange's volatility index, or the VIX.
The index .VIX closed just above its 200-day moving average on Thursday, and has not closed below it since September 2008.
While equity markets were buzzing about banks, currency markets were focused on the aftermath of unexpected actions taken by the Swiss National Bank, as more central banks turned to unorthodox measures to support their economies.
"The most obvious candidate for combining quantitative easing with intervention in the FX markets is the Bank of Japan, simply because the BoJ has the historical precedent of intervening in the past," UBS currency strategists said in a note.
U.S. crude futures dipped back under $47 a barrel after rocketing 11 percent higher overnight following a not-so-dire U.S. retail sales report for February. Crude for April delivery slipped 0.5 percent to $46.77 a barrel.