The yen rose on Friday, helped by the biggest monthly spike in Japanese industrial output since 1953, while crude prices eased from a six-month high but were still up around $3 this week on expectations of increased demand.
Higher commodity prices this week supported mining and energy-related stocks in Asia, though investors were reluctant to take big bets on increasingly expensive shares until more evidence emerged of a sustained recovery.
Big flows of capital out of Japan from retail investors seeking higher returns overseas could still keep the yen under pressure in the medium term, especially with data showing unemployment rising to a 5-1/2-year high in April.
"The firmness in stocks has boosted Japanese retail investors' risk appetite," said Tsutomu Soma, a senior manager in the foreign securities department at Okasan Securities, adding that household investors' money is also flowing out of the country through pension funds.
"Profit-taking in overseas currencies may temporarily lift the yen, but the downward trend in the yen is likely to stay intact," Soma said.
The U.S. dollar was down 0.6 percent to 96.30 yen, though was still up 2.3 percent in May, the biggest monthly gain of the year, with Japanese investors finding value mostly in foreign bond markets.
The yen got a boost after data showed Japanese industrial production rose 5.2 percent in April on a monthly basis, and the government expected continued gains through June.
The euro fell 0.3 percent to 134.71 yen after hitting a seven-week high overnight.
The Australian dollar advanced 0.4 percent to US$0.7883, testing the seven-month high reached on Wednesday.
Higher commodity prices and evidence of an economic strength in China have propelled the Australian currency, making it a proxy for global growth prospects.
COMMODITY BULLS
The Reuters-Jefferies CRB index .CRB, a global commodities benchmark, was up 12.3 percent in May, on its way to the biggest monthly gain since July 1974.
"Gains in commodities reflect continued recovery of demand outlook from its collapse after Lehman's bankruptcy triggered concerns of a depression," said Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong.
"Medium-term outlook remains positive for commodities and other risky asset classes as we continue to expect that U.S. GDP will start to expand in Q3 and several major Asian economies already in Q2," he said in a note.
Beside a 1 percent rise in Australia's benchmark S&P/ASX 200 equities index .AXJO, Asia's stock markets were largely unchanged.
