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 Yellen's testimony to a Senate committee helped the S&P 500 <.SPX>
shrug off fears of rising tension in Ukraine and Russia and close at
a record high. But the fear factor still helped the yen rise against
the dollar and euro on its traditional safe-haven appeal.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> rose 0.2 percent, on track for a weekly gain, while
Tokyo's Nikkei stock average <.N225> erased most losses and ended
the morning session just a few ticks shy of flat.
Tokyo got some help from data showing Japanese factory output rose
in January at the fastest pace in more than two years and core
inflation stood close to a five-year high.
Optimism about the Japanese economy will likely support the mood
even as wariness might cap the upside, said Hikaru Sato, a senior
technical analyst at Daiwa Securities in Tokyo.
"Investors are avoiding risks as they are staying cautious about the
situation in Ukraine and emerging markets' assets," Sato said.
Yellen said on Thursday the Fed will continue to determine whether
recently severe winter weather was behind recent signs of weakness,
and reemphasized that it would take a "significant change" to the
economic outlook to sway the Fed from its plans to taper its
stimulus.
"Her openness bolstered risk appetite because it assures a gradual
course of tapering by the central bank with the only risk being a
smaller and not larger reduction," BK Asset Management managing
director Kathy Lien said in a note to clients.
An unexpected rise in U.S. durable goods orders, excluding
transportation, also helped distract investors from an increasingly
unstable situation in Ukraine.
Armed men seized the parliament in Ukraine's Crimea region on
Thursday and raised the Russian flag.
Fighter jets along Russia's western borders were on combat alert,
the Defense Ministry was quoted as saying on Thursday by Interfax
news agency.
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The unrest prompted investors to seek the safety of U.S. Treasuries,
pushing yields to two-week lows. The yield on the 10-year note
inched up to 2.647 percent in Asia, from its U.S. close of 2.642 on
Thursday.
The dollar's early gains against the yen unraveled, with the U.S.
unit shedding about 0.3 percent to 101.86 yen, moving back toward a
one-week low of 101.70 yen touched on Thursday.
"Isolated incidents from Ukraine will continue to move the dollar at
least until elections are held there in May," said Masafumi
Yamamoto, chief strategist at Praevidentia Strategy in Tokyo.
"Any losses the dollar suffers against the yen will be temporary,
however, as bargain hunters will be ready each time, supported by
the notion that real military conflict will be unlikely," Yamamoto
added.
The euro was nearly flat on the day at $1.3707, pulling away from
the previous session's two-week low of $1.3641.
It also surrendered territory to the yen, losing 0.3 percent to
139.62, moving back in the direction of a more than two-week low of
138.75 yen touched on Thursday.
China's yuan, meanwhile, has fallen 0.8 percent against the dollar
for the week and is set for the biggest weekly loss on record.
In commodities trading, gold prices were flat with spot gold trading
at $1,332.35, but was on track for its fourth week of gains.
Oil slipped, taking its cues from unrest in the Ukraine, with Brent
crude down about 0.1 percent at $108.89 a barrel. U.S. oil was down
0.3 percent at $102.07, but it was still on track for a monthly gain
of over 4 percent.
(Additional reporting by Ayai Tomisawa
and Shinichi Saoshiro in Tokyo; Editing by Shri Navaratnam and Eric
Meijer)
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