SYDNEY, Aug 9 (Reuters) - Asian shares are ending a

rough week on a high as Japanese stocks are close to recouping

all of the huge losses from Monday, while the yen slipped again

as markets pared back the chance of an outsized U.S. rate cut.

Japan's Nikkei rose another 1.7% on Friday, tracking

a strong rebound on Wall Street overnight. It has erased most of

a 13% crash on Monday and was set for a weekly drop of just

1.5%.

MSCI's broadest index of Asia-Pacific shares outside Japan

climbed 1.4%, more than reversing the drop from

Thursday. For the week, it is down 0.3%.

Overnight, data showed U.S. 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% from 69% a day earlier.

Stocks had sold off sharply after last week's U.S. jobs

report sparked fears of a potential U.S. recession, but

investors have bought into the recent dip, with the Nasdaq

3% higher overnight and S&P 500 up 2.3%.

Also helping sentiment is Chinese data showing that consumer

inflation ran at 0.5% in July, above forecasts of a gain of

0.3%, suggesting there is less risk of the economy sliding into

outright deflation.

Chinese blue chip stocks rose 0.5%, and Hong

Kong's Hang Seng index jumped 1.4%.

"The prospect of better-than-feared U.S. 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 labour 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 labour

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 U.S. 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% this

week, despite Monday's precipitous 1.5% 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. U.S. 10-year yields held at 3.9781%, well

off Monday's low of 3.667%, and were set for a weekly gain of 18

basis points.

Two-year yields were up 15 bps this week to

4.0193%.

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% to $78.97 a barrel,

but were up more than 3% for the week, while U.S. West Texas

Intermediate crude also slipped 0.2% to $76.03, also up

over 3% for the week.

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