TOKYO (Reuters) - The yen hovered near fresh lows against the dollar and Japanese stocks jumped on Tuesday after a U.S. official voiced support for Japan's drive to beat deflation, assuaging fears that criticism of its aggressive stance on monetary policy would mount.
Asian shares were steady, with many regional bourses shut for holidays. Encouraging data from China late last week was lending support but markets lacked momentum as investors await key events such as the U.S. president's State of the Union address.
Rhetoric about a so-called currency war was dialled back ahead of a Group of 20 meeting. In addition to U.S. Treasury Undersecretary Lael Brainard saying the United States supports Japanese efforts to end deflation, European Central Bank council member Jens Weidmann said the euro was not overvalued at current levels.
On Monday, the yen sank to its lowest since May 2010 of 94.465 and also plunged over 2 percent against the euro as traders saw Brainard's remarks as an encouraging sign to sell the yen further.
In early Tuesday trade, the dollar was trading at 94.22 yen and the euro was at 126.35 yen. The euro scaled its highest since April 2010 of 127.71 yen last week.
Japan's Nikkei stock average opened 1.7 percent higher, after snapping a 12-week winning streak to close down 1.8 percent on Friday.
"While currency moves have been sensitive to officials' comments in general, people thought any comment from the G20 would trigger yen buying," said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities.
"But such worries are receding as she (Brainard) said she supports Japan's efforts to end deflation."
The MSCI's broadest index of Asia-Pacific shares outside Japan was little changed, with Australian shares inching up 0.2 percent and South Korean shares opening up 0.4 percent.
Trading resumed in Japan and South Korea but markets remained closed in Singapore, Hong Kong, mainland China, Malaysia and Taiwan.
G20 finance ministers and central bankers meet in Moscow on Friday and Saturday, and G20 officials said on Monday the Group of Seven nations are considering a statement this week reaffirming their commitment to "market-determined" exchange rates.
Currency and equities markets were also looking ahead to President Barack Obama's State of the Union address later on Tuesday, for any signs of a deal to avert automatic spending cuts due to take effect on March 1.
"We believe that the G20's take on currency wars, Mr. Obama's upcoming state of the union address, and data on the current condition of the US economy should help markets assess where the global recovery stands and where we are heading," Barclays Capital said in a research.
The yen is expected to stay under pressure on expectations that Prime Minister Shinzo Abe will endorse a far more dovish Bank of Japan regime when the current leadership's term ends next month. The BOJ is expected to refrain from taking fresh easing steps when it meets this week.
Wall Street and world equity markets were little changed in light volume on Monday as a lack of major economic news gave investors little incentive to push prices higher for now, after a robust performance last week.
Encouraging U.S. and Chinese data last week lifted the tech-focused Nasdaq Composite Index to a 12-year closing high and the Standard & Poor's 500 Index to a five-year peak on Friday.
U.S. crude futures edged down 0.1 percent to $96.91 a barrel.
(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Edwina Gibbs)