Asian shares were steady but remained vulnerable on Thursday amid signs European leaders were unable to deliver meaningful measures to resolve the region's deepening debt crisis.
European Union leaders, at an informal meeting on Wednesday, have been advised by senior officials to prepare contingency plans in case Greece quits the single currency area.
But they also said they wanted Greece to stay in the euro zone while respecting commitments it had made in return for its bailout.
"Uncertainty is back and little sign of eased selling by foreign investors does not bode well for the market," Ham Sung-sik, an analyst at Daishin Securities said of Korean shares.
Investors were also cautious ahead of China's HSBC flash manufacturing PMI number due later in the day, which will help gauge the pace of slowdown in the world's No.2 economy.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.2% while Japan's Nikkei stock average rose 0.4%.
Analysts said that with European leaders at odds over specific schemes to prevent a contagion from political turmoil in Greece and to help stabilise fragile banking systems, it was hard to build positions in risk assets.
"Chancellor Merkel has rejected eurobonds for now, but there are plenty of other alternatives such as bank capitalization programs through the EFSF and looser ECB monetary policy," Barclays Capital analysts said in a research note.
"Yet European policymaking does not seem ready to move in that direction; therefore we prefer to stay in 'risk off' mode," they said.
The European Financial Stability Facility (EFSF) is the euro zone's temporary bailout fund.
The euro eased 0.2% to $1.2563, hovering just above its Wednesday's intraday low of $1.25453, its lowest level since July 2010.
Against the yen, it traded near 99.531, its lowest in more than than three months hit on Wednesday.
The murky outlook for the future of the euro zone has prompted investors to park their money in safe haven assets such as US and German government bonds, the US dollar or cash.
The dollar index on Wednesday rose to 82.221, its highest since September 2010.
Ashraf Laidi, chief global strategist City Index said the index could climb towards 90 later this year, citing potential catalysts such as a mismanagement of a Greece exit from the euro zone, or if Athens and its global lenders remained deadlocked.
US 10-year yields fell to 1.73% on Wednesday, nearing 1.67% set in September, which was the lowest in at least 60 years.
The EU leaders also discussed broad measures to stem the fallout from a winding up or restructuring of bad banks on Wednesday.
Spain announced a 9-billion-euro bailout for troubled lender Bankia, its fourth-largest, on Wednesday, while also seeking ways to help its highly indebted regions meet huge refinancing needs.
US crude futures recovered 0.5% to $90.32 a barrel on Thursday, after ending down 2.1% at $89.90 the previous day when it touched its lowest level since November 1. Brent was up 0.3% at $105.97, after settling down 2.6%.
Asian credit markets remained on the defensive, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by about four basis points early on Thursday.
