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.
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.
Japan's Nikkei share average <.N225> was trading flat on the day, having punched above its 200-day moving average and now girding up for a challenge of the previous high for the year reached on May 11.
Hong Kong's Hang Seng index slipped 0.3 percent <.HSI> after opening at an eight-month high.
The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> rose 0.5 percent to its highest since October 6, on its way for a third consecutive month of double-digit percentage gains.
Asia has continued to lead a global equity rally that began on March 9. The MSCI index has surged 51 percent since March 9 while the all-country world index <.MIWD00000PUS> has climbed 30 percent.
U.S. oil prices slipped to $64.71 after climbing to $65.44 on Thursday, the highest since early November, after OPEC held production at current levels.
The Organization of the Petroleum Exporting Countries kept output targets unchanged on Thursday, as expected, betting on a strengthening world economy and tentative signs of increased demand to boost oil prices.
(Additional reporting by Rika Otsuka in TOKYO)