Asia stocks rose on Friday, with investors awaiting a vote on a massive U.S. stimulus package, while the dollar was steady ahead of U.S. employment data likely to reflect a deep recession.
Most other currencies and U.S. Treasuries remained in narrow trading ranges, with the market's attention focused on the fate of stimulus measures and a "bad bank" scheme to separate the toxic assets plaguing financial institutions, which is expected to be announced next week.
The overwhelmingly clear direction of economic data in most countries has pointed to weakness but investors would like to see the size and scope of the next U.S. stimulus effort to determine how quickly a recovery could take shape. The U.S. Senate is debating a $920 billion plan but it could shrink before being passed.
"Expectations for some fresh development in the U.S. economic measures next week, including the establishment of a 'bad bank' scheme, and a weaker yen are encouraging investors to pick up stocks," said Fumiyuki Nakanishi, manager at SMBC Friend Securities in Tokyo.
Japan's Nikkei share average .N225 rose 1.7 percent, with Softbank Corp stock (9984.T) among the biggest boosts to the index after the country's third-largest mobile phone operator reported a 2 percent rise in quarterly profit and kept its forecast for the year.
The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS climbed 1.2 percent, tacking on a second consecutive week of gains.
Hong Kong's Hang Seng .HSI rose 2.3 percent, gapping higher at the open, with index heavyweights such as HSBC (0005.HK) and China Mobile (0941.HK) in solid demand.
Short-term movement markets are notoriously difficult to forecast, even without a global financial crisis. However, Garry Evans, head of pan-Asian strategy with HSBC in Hong Kong, said after a few more weeks of hard times, regional stocks should rally for a couple of months on improvements in the U.S. economy and expectations of a second-half recovery.
Evans said though that this will not be a start of a bull market since the sword of under-capitalized banks, the effects of a rapid slowdown in Asia and big budget deficits among other things still hangs over investors.
"We are comfortable, then, with our view that, after all these ups and downs, Asian equities will end the year close to where they started it. But after the excitements of last year, maybe dull is good," he said in a note.
The U.S. dollar slipped against the yen in cautious trade before key jobs data that is expected to paint an even bleaker picture of the U.S. labor market.
The dollar slipped 0.1 percent to 91 yen after at one point rising above 92 yen to a one-month high overnight on hopes the government rescue plan for banks might include suspension of a key accounting rule, thawing investors' aversion to risk.
The euro was at $1.2790.
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The Australian dollar fought back from initial losses after the country's central bank slashed its growth forecasts, paving the way for more interest rate cuts.
