By Wayne Cole

SYDNEY (Reuters) – Oil prices were holding hefty gains in Asia on Wednesday having rallied 19 percent in just four sessions, while the U.S. dollar nursed big losses as a revival in risk appetite swept through crowded trading positions.

A jump in global commodity prices also helped ease deflationary fears, boosting equities and shoving sovereign bond yields up from generational lows.

The improved mood owed much to progress in the stand-off over Greece as the country’s new government dropped calls for a debt write-off and instead offered a plan for a swap. [TOP/CEN]

Market positioning exaggerated the moves as investors have been very short on oil and very long on dollars and bonds.

Benchmark Brent crude oil finished Tuesday with a gain of $ 2.25 to $ 57.00 a barrel, having been as high as $ 59 at one stage. U.S. crude was quoted at $ 51.91 in erratic trade, after rising 7 percent on Tuesday.

Traders said oil bulls were encouraged by BP’s plan to cut capital expenditures 13 percent in 2015, which came after reductions announced by other major energy companies.

The bounce in oil forced a wave of short covering in commodity currencies such as the Canadian and Australian dollars, mainly to the cost of their U.S. counterpart.

The U.S. dollar index dropped 0.9 percent on Tuesday for its biggest one-day fall since Oct 2013, before steadying at 93.708 <.DXY> in early Asian trading.

The shift helped lift the euro to $ 1.1488 , an eye watering reversal from Tuesday’s low of $ 1.1312. The only calm spot was the dollar against the yen which remained remarkably steady around 117.48 .

In share markets, Nikkei futures pointed to an early gain of over 100 points while MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.7 percent.

Australia’s main share index <.AXJO> climbed 1.4 percent to a near seven-year peak as bulls basked in the glow of Tuesday’s cut in domestic interest rates.

On Wall Street, the Dow <.DJI> had ended Tuesday 1.76 percent higher, while the S&P 500 <.SPX> gained 1.44 percent and the Nasdaq <.IXIC> 1.09 percent.

Greek markets had led the way in Europe with Athens’s benchmark stock index <.ATG> up more than 11 percent, while yields on 10-year bonds fell more than 160 basis points.

It was far from clear whether Greece’s proposed debt-swap plan would get anywhere with euro zone officials giving it a chilly reception.

Yet the improvement in risk sentiment was enough to trigger a selloff in Treasuries, where yields on 10-year paper jumped to 1.799 percent in the biggest daily rise in 14 months.

(Editing by Shri Navaratnam)