Asian equity markets rebounded on Wednesday after an aggressive rate hike from the Turkish central bank soothed worries over volatility in emerging markets.
Turkey's central bank raised its overnight lending rate to 12 percent from 7.75 percent in its first emergency meeting since 2011. The move is aimed at stemming the lira's sharp declines and follows Tuesday's unexpected rate hike from the Reserve Bank of India. In reaction, the lira rose to 2.2 to the dollar from 2.253, while Dow futures spiked as much as 150 points.
"It's great news and establishes that the Turkish central bank is independent. But it doesn't make everyone feel better across emerging markets such as Argentina, which is in a very different position," said Ed Ponsi, managing director at Barchetta Capital Management.
The decision comes ahead of a Federal Reserve policy announcement later on Wednesday, where the central bank is expected to cut another $10 billion from its now $75-billion-a-month bond-buying program.
Nikkei rallies 2.7%
Japan's benchmark Nikkei closed in positive territory for the first time in a week and posted its biggest gain in nearly 5 months, according to Thomson Reuters data. A weaker currency underpinned gains as the yen extended its pullback to trade at 103.4 per dollar, retreating further from Monday's seven-week high of 101.7.
Among the top gainers, Sharp rallied 8 percent on reports that group net profit for the April-December period may have risen for the first time in three years.
Advantest, the world's largest maker of chip testing equipment, closed down 4 percent following an earlier 9 percent plunge after widening its full-year net-loss forecast by 14 times.
Shanghai gains 0.6%
Mainland shares extended gains for a second straight session but the yuan fell to its lowest levels in nearly two weeks ahead of the Lunar New Year holidays. Shanghai and Hong Kong markets will be shut from January 30 and will resume trade on February 5.
Focus remained on liquidity levels amid market talk that the People's Bank of China (PBOC) could stand pat at Thursday's open market operation, following Tuesday's cash injection.
(Read more: Why China isn't ready to let trust investments fail)
Sydney 1% higher
Australia's benchmark index recovered from the previous day's one-and-a-half-month closing low while the Australian dollar rose above 88 U.S. cents to a one-week high.
Resources rallied on the back of improved full-year production guidance. Among them were Drillsearch Energy and Atlas Iron; shares rallied 6 and 10 percent, respectively.
Engineering firm Forge slumped 9 percent after saying it expects a 2014 full-year loss.
Kospi up 1.2%
South Korean shares extended gains to move further away from Monday's five-month low after December industrial production beat expectations to rise a monthly 3 percent, the fastest monthly rate since 2009.
In earnings news, Asia's fifth largest steelmaker Posco rose 0.3 percent despite reporting a 60 percent annual drop in fourth quarter net profit while the nation's flag carrier, Korean Air, rallied over 7 percent despite posting weak results.
(Read more: Who pays the pricefor the emerging market mess?)
Meanwhile, the won jumped 0.8 percent against the dollar, its sharpest rise in four months.
Emerging markets gain
Indonesia's Jakarta Composite climbed 1.7 percent, Indian shares slipped 0.18 percent and Philippine shares closed nearly 1 percent higher.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC