Asian traders returned to buying Wednesday, reversing the previous day's losses as Donald Trump's measured response to North Korea's missile launch and upbeat US data restored a semblance of calm to markets.
The rush to the sidelines that followed Pyongyang's launch of a rocket over Japan Tuesday abated through the day as initial fears subsided, while the dollar clawed back losses against the yen and euro.
While Japanese Prime Minister Shinzo Abe called the launch "an unprecedented, serious and grave threat", Trump -- who had warned of "fire and fury" over a previous missile test -- said only that "all options" were on the table.
North Korean leader Kim Jong-Un has promised more missile flights over Japan, insisting his nuclear-armed nation's provocation was a mere "curtain-raiser", in the face of UN condemnation and US warnings of severe repercussions.
But while analysts said the North Korea threat was still apparent, unease had been soothed by the fact that Trump and Abe were sticking to a diplomatic line and the UN Security Council had met.
"With a toned-down President Trump and the UN Security Council in closed-door meetings with economic sanctions the preferred option, the world just feels like a safer place today, and investors are relishing this respite," said OANDA head of Asia-Pacific trading Stephen Innes.
On equity markets Seoul -- which ended down 0.2 percent Tuesday after losing more than one percent in the morning -- added 0.3 percent and Tokyo's Nikkei finished 0.7 percent higher, helped by a weaker yen.
Hong Kong rallied 1.2 percent in the afternoon and Singapore put on 0.5 percent, while Sydney, Wellington, and Taipei closed higher. However, Shanghai ended 0.1 percent down after late selling.
In early European trade London and Paris each rose 0.5 percent and Frankfurt added 0.7 percent. All three had ended sharply lower on Tuesday.
"The 'risk off' sentiment that overshadowed markets after the launch of yet another missile from North Korea didn't even last 24 hours," David de Garis, director at National Australia Bank, said in a commentary.
The dollar plunged Tuesday to as low as 108.50 yen as dealers rushed for safe investments but managed to bounced back later in the day and in early Asian trade was at 110 yen.
The greenback also picked up against the euro, a day after the single currency broke above $1.2000 for the first time since January 2015. The euro has been boosted by expectations the European Central Bank will soon start cutting down its stimulus, while talk of fresh Federal Reserve interest rate rises has eased.
The US unit was supported by bargain-buying and a strong consumer confidence reading, while dealers are upbeat about upcoming US jobs data on Friday.
However, Satou Masakazu, senior analyst at Gaitame Online, said "in the long run, the euro-buying sentiment remains strong".
Oil prices remain subdued by Hurricane Harvey's impact on Texas and the crude sector.
Both main contracts ticked down marginally Wednesday a day after eking out minor gains and traders are fearful of a long-term shutdown of refining capacity in the oil-rich Gulf Coast region.
"The effect of Hurricane Harvey has been devastating on the US," said Sukrit Vijayakar, an analyst with energy consultancy Trifecta.
"In terms of the energy market, what needs to be seen is how soon the shut in capacity comes back on stream."
Tokyo - Nikkei 225: UP 0.7 percent at 19,506.54 (close)
Hong Kong - Hang Seng: UP 1.2 percent at 28,091.40
Shanghai - Composite: DOWN 0.1 percent at 3,363.63 (close)
London - FTSE 100: UP 0.5 percent at 7,374.07
Euro/dollar: DOWN at $1.1954 from $1.1974 at 2100 GMT
Pound/dollar: DOWN at $1.2913 from $1.2919
Dollar/yen: UP at 110.00 yen from 109.75 yen
Oil - West Texas Intermediate: DOWN six cents at $46.38 per barrel
Oil - Brent North Sea: DOWN nine cents at $51.91
New York - Dow: UP 0.3 percent at 21,865.37 (close)