Nikkei leads Asian stock market rally amid a higher US dollar and positive manufacturing data

Most Asian stock market indices were trading higher on Wednesday (4 January), with the Shanghai Composite up 0.49% at 3,151.36 as of 5.21am GMT. The Nikkei 225 saw the highest gain of more than 2% amid a strong US dollar and positive economic data.

The dollar hit a 14-year high against a basket of currencies and the stronger greenback against a weaker Japanese yen gave the exporter-heavy Nikkei a boost.

Japanese stock markets also got a boost from positive manufacturing data that indicated a turnaround in the sector. The manufacturing Purchasing Managers Index (PMI) came in at 52.4 for December. This was not only higher than the preliminary reading of 51.9, but was also more than November's PMI of 51.3. A reading above 50 indicates expansion in the sector, while that below 50 reflects contraction.

Vishnu Varathan, head of economics and strategy for the region at Mizuho Bank, was cited by CNBC as saying: "The weak yen and buoyant regional PMIs/ISM were reasons for optimism about Japanese exporters."

Markets elsewhere in Asia were also mostly in the green following the recent upbeat factory data from China, the eurozone and the US. On Tuesday, China reported that its Caixin manufacturing PMI climbed in December to 51.9, higher than November's 50.9, marking its best reading since January 2013.

This was supported by positive manufacturing data in the UK and the US. Also on Tuesday, the Markit/CIPS UK Manufacturing PMI was reported to have risen to 56.1. This was not only better than November's 53.6, but also marked its best reading since June 2014. In the US, factory activity was reported to have touched a two-year high amid an increase in new orders.

Analysts at Barclays as cited by Reuters, said amid these data, their measure of confidence in the global manufacturing sector as a whole touched the highest levels since December 2013.

Indices in the region were trading as follows at 5.42am GMT:

Among commodities, oil prices were trading in the green. As of 12.31am EST, WTI crude oil was trading 0.76% higher at $52.73 (£43.06) a barrel, while Brent crude was trading 0.78% higher at $55.90 a barrel.