Japan's Nikkei rose another 1.7 percent on Friday, tracking a strong rebound on Wall Street overnight. It has erased most of a 13 percent crash on Monday and was set for a weekly drop of just 1.5 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.4 percent, more than reversing the drop from Thursday. For the week, it is down 0.3 percent.

Overnight, data showed US jobless claims fell more than expected last week, suggesting fears the labor market is unraveling were overblown. That led markets to pare back the chance of an outsized half-point rate cut from the Federal Reserve in September to 54 percent from 69 percent a day earlier.

Stocks had sold off sharply after last week's US jobs report sparked fears of a potential US recession, but investors have bought into the recent dip, with the Nasdaq 3 percent higher overnight and S&P 500 up 2.3 percent.

Also helping sentiment is Chinese data showing that consumer inflation ran at 0.5 percent in July, above forecasts of a gain of 0.3 percent, suggesting there is less risk of the economy sliding into outright deflation.

Chinese blue-chip stocks rose 0.5 percent, and Hong Kong's Hang Seng index jumped 1.4 percent.

"The prospect of better-than-feared US growth and a weaker yen constrain the fundamental and technical risks that inspired the extreme volatility experienced at the start of the week," said Kyle Rodda, a senior financial market analyst at Capital.com.

"It's unlikely that the markets have turned the corner yet. Whether this week's volatility is an omen of deeper downside or merely a growth scare will depend on the August Non-Farm Payrolls report and whether it reveals further deterioration in labor market conditions."

A few Federal Reserve officials said they were increasingly confident that inflation is cooling enough to allow interest-rate cuts ahead, but not because of the recent market rout.

Kansas City Fed President Jeff Schmid, one of the more hawkish policymakers, said he viewed the current policy stance as "not that restrictive", the economy resilient and labor market still quite healthy.

"If inflation continues to come in low, my confidence will grow that we are on track to meet the price stability part of our mandate, and it will be appropriate to adjust the stance of policy," said Schmid.

The US dollar gained on the strong jobless claims data. It was up for a fourth straight day on the Japanese yen at 147.35 yen, on course for an advance of 0.6 percent this week, despite Monday's precipitous 1.5 percent plunge.

The yen had gained earlier in the week following a surprise rate hike by the Bank of Japan, which led to the unravelling of the popular carry trade - where investors borrow yen at low rates to buy higher yielding assets - but that seemed to be stabilising.

The BOJ's reassurance that it will not be hiking interest rates amid market volatility also helped sentiment recover.

Commodity Futures Trading Commission figures later on Friday will give a clearer indication of whether that unwinding has now run its course.

Bond yields have climbed this week with safe havens in less demand. US 10-year yields held at 3.9781 percent, well off Monday's low of 3.667 percent, and were set for a weekly gain of 18 basis points.

Two-year yields were up 15 bps this week to 4.0193 percent.

In commodities, crude oil slipped on Friday but are set for decent weekly gains on supply fears amid the widening conflict in the Middle East as Israel waits for a threatened attack from Iran and its proxies.

Brent crude futures fell 0.2 percent to $78.97 a barrel, but were up more than 3 percent for the week, while US West Texas Intermediate crude also slipped 0.2 percent to $76.03, also up over 3 percent for the week.

Gold prices also eased, down 0.1 percent at $2,424.26 an ounce.