HONG KONG - Asian markets mostly rose Monday on optimism that US lawmakers will be able to agree a deal to avert a fiscal cliff that would tip the world's biggest economy back into recession.
The Nikkei in Tokyo enjoyed a third straight rally due to the yen's weakness after the front-runner to become Japan's next prime minister said he would push for unlimited monetary easing if his party won next month's general election.
Tokyo climbed 1.42 per cent, Hong Kong added 0.43 per cent, Sydney climbed 0.21 per cent and Seoul was up 0.90 per cent but Shanghai eased 0.20 per cent.
US President Barack Obama met congressional leaders from both parties to open talks on pulling back from the fiscal cliff of tax hikes and spending cuts due to take effect on January 1.
Fears over the looming deadline have hammered markets for most of the month.
The two sides stressed a willingness to find common ground and avoid a face-off like that over the country's debt ceiling, which almost brought the country to a standstill in August last year.
"There is no more 'let's do it some other time,'" said Senate Democratic leader Harry Reid. "This isn't something we're going to wait until the last day of December to get it done."
And Republican John Boehner, speaker of the House of Representatives, emerged from the initial session on Friday saying they had laid a framework for a deal that represented "a fair and balanced approach."
"To show our seriousness, we've put revenue on the table. As long as it's accompanied by significant spending cuts."
The comments helped Wall Street. The Dow finished up 0.37 per cent and the S&P 500 added 0.48 per cent, although the Nasdaq shed 0.57 per cent.
On currency markets the increased confidence that a deal can be sealed in Washington saw investors move away from the safe-haven yen, providing support to the under-pressure euro and the dollar.
The euro bought US$1.2754 (S$1.56) and 103.75 yen (S$1.60) in early trade, up from US$1.2741 and 103.60 yen in New York late Friday.
The dollar rose to 81.36 yen from 81.31 yen.
The dollar climbed 2.3 per cent against the yen last week, its best week since February.
The yen was also under selling pressure after Shinzo Abe said last week that he would press the Japanese central bank to carry out a more aggressive monetary policy, which would flood markets with the local currency.
Abe is the leader of the opposition Liberal Democratic Party, which is expected to win the national polls called for December 16.
The Nikkei rose 1.90 per cent Thursday and another 2.20 per cent on Friday on expectations of a win for Abe, who is a former prime minister.
"After Friday's rise, there is renewed energy in the market," said Hiroichi Nishi, general manager of equities at SMBC Nikko Securities.
"With the weaker yen and stronger US stocks, the market is looking more bullish," he told Dow Jones Newswires.
Oil prices rose, with New York's main contract, light sweet crude for delivery in January, adding 60 cents to US$87.52 a barrel and Brent North Sea crude for January delivery gaining 53 cents to US$109.48.
Gold was at US$1,722.90 by 0210 GMT compared with US$1,707.80 late Friday.