HONG KONG (Reuters) � Global stock markets were on their way to a third week of gains on Friday, with emerging markets favored, while the threat of Japanese intervention kept the yen close to its lows for the month.
Japanese stocks were poised for the largest weekly gains in two months following Tokyo's aggressive yen selling on Wednesday, which may have totaled as much as 1.9 trillion yen, and repeated pledge to do more if necessary.
Still, that has been mostly catch up with other advanced markets after underperforming most of the current quarter.
"In addition to the fact that investors aren't still entirely sure about the outlook for the global economy, they are also closely watching whether there would be any comments from the United States on Japan's currency intervention," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities in Tokyo.
The Nikkei share average was up 0.7 percent on the day (.N225) and has gained 3.7 percent this week after yen selling intervention brightened the prospects of exporters.
The MSCI index of Asia Pacific shares outside Japan edged up 0.3 percent (.MIAPJ0000PUS), led mainly by the materials sector as investors scooped up cheaper stocks after a selloff on Thursday.
The MSCI all-country world stocks index (.MIWD00000PUS) was up 1.7 percent so far this week, on track for the third week of rises. Emerging market stocks, up 2.1 percent in the week, have been a big contributor.
Chinese stocks will be a focus for investors after domestic media reported the country's banking regulator is not planning on raising capital requirements, contrary to other reports earlier in the week.
China set the mid-point of the yuan's daily trading range at a new high for the sixth consecutive day. This came on the heels of U.S. Treasury Secretary Timothy Geithner's vow to the U.S. Congress to rally other world powers to push Beijing to move faster on the yuan.
China's guiding hand to lift its currency has been a signal for other Asian policymakers earlier in the year to allow their own currencies to strengthen. However, Japan's intervention this week along with doubts about the pace of global recovery appears to have changed that trend.
In currency markets, the U.S. dollar was nearly unchanged on the day at 85.70 yen, still within spitting distance of its overnight high around 85.93 yen.
Both short-term investors have begun to close out of their bets on yen strength after Wednesday's nearly 3 yen gain in the dollar. However, Japanese exporters may sell dollars near 86 yen, putting a lid on dollar strength, a trader said.
"The real key positioning is probably what the corporates and Japanese investors need to do and I think there are still corporates out there that need to sell," said Greg Gibbs, currency strategist at Royal Bank of Scotland in Sydney.
The euro's performance against the yen will also be watched on Friday, after the single currency rallied some 0.6 percent against the dollar on Thursday after auctions of 10- and 30-year Spanish government bonds produced lower yields than a previous sale in June.
The euro was at 112.07 yen, steady on the day.
The yield on the 10-year U.S. Treasury note was largely unchanged on the day at 2.76 percent after climbing 4 basis points on Thursday after a drop in initial jobless claims.
Still, the spread of the U.S. 10-year yield of the same maturity Japanese government bond has widened 7 basis points this week, helping Japan's cause to pull down the yen.
(Additional reporting by Charlotte Cooper and Aiko Hayashi in Tokyo)
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