GLOBAL MARKETS-Asian shares recover after bruising selloff, sentiment still fragile
* MSCI Asia ex-Japan rises 1.4 pct, Nikkei jumps after sharp sell-off
* Markets respond to upbeat US data, but sentiment still fragile ahead of Fed meeting
* Dollar stays volatile vs yen as position unwinding continues
TOKYO, June 14 (Reuters) - Asian shares rebounded from multi-month lows on Friday, as upbeat economic data boosted U.S. equities and calmed nerves after a bruising selloff in global markets, but investors remained anxious ahead of next week's Federal Reserve policy meeting.
Volatility was still high in currency markets, with the dollar at one point losing more than 1 percent from early gains against the yen, and approached Thursday's four-month lows against a basket of six major currencies.
Wall Street rallied more than 1 percent on Thursday and the dollar pared losses on better-than-expected U.S. retail sales in May and a drop in the weekly jobless benefits claims, which signalled resilience despite fiscal tightening in America.
The better data appeared to bring some temporary relief to markets that have been rocked by uncertainty on whether the Fed would dial back its massive stimulus later this year. The U.S. central bank's huge bond-buying scheme has been the main source of rallies in broad risk assets.
Analysts expect markets to remain on edge ahead of the Fed meeting on June 18-19.
"The Fed tapering speculation is keeping equities nervous and currencies will remain volatile until stability returns to equities," said Koji Fukaya, FPG Securities CEO in Tokyo.
"Because yen-short and dollar-long positions had been built to excessive levels, the reversal is deep. The yen selling was overdone and the latest market turbulence has taken much of that excess out," Fukaya said, adding that markets may view the dollar around 95 yen as a comfortable level for now.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 1.4 percent, but was set for a weekly decline of around 1.5 percent. It tumbled more than 2 percent at one point to its lowest since September on Thursday and closed down 1.3 percent for its biggest daily drop in three weeks.
Over the past three weeks global markets from stocks to emerging currencies were roiled by Fed Chairman Ben Bernanke hinting at the possibility of tapering the bond-buying stimulus if the economy continued to improve. A string of weak Chinese data also heightened investor anxiety.
South Korean shares rose 0.4 percent after slumping to a seven-month closing low on Thursday on selling by foreign investors, while Australian shares rebounded 1.8 percent after sinking to a 5-1/2-month low the previous day.
"Sentiment has improved following forecast-beating economic data from the U.S., but caution still largely rules markets ahead of the FOMC's meeting next week," said Kim Soon-young, a market analyst at IBK Securities, of Seoul shares.
Southeast Asian stocks also stabilised, with the Philippine index rising 3 percent after suffering its biggest loss since October 2008 on Thursday as investors worried about a destabilising outflow of funds when the Fed's injection of liquidity dries up.
In the strongest sign yet in regional emerging economies of the stress being wrought by the global markets rout, Indonesia on Thursday became the first central bank in Asia to raise its policy interest rate since 2011.
Two other central banks -- the Philippines and South Korea, however, decided to stand pat on Thursday.
NIKKEI JUMPS IN VOLATILE SESSION
Japan's Nikkei stock average climbed 2.8 percent. The index ended the previous session down 6.4 percent to its lowest close since April 3, snapping back into bear territory. The Nikkei scaled a 5-1/2-year high last month, aided by the Japanese government's sweeping policies to revive the economy.
The unusually swift pullback in Japanese stocks comes as investors have started to question the efficacy of the new government's economic policies and the Bank of Japan's big-bang stimulus.
Japan's cabinet rubber-stamped a set of measures on Friday to boost economic growth that so far have failed to impress markets and made Prime Minister Shinzo Abe promise to take more steps after next month's upper house elections.
The BOJ's decision at its meeting earlier this week to skip fresh steps to calm domestic bond market turbulence and the Fed tapering jitters accelerated a wave of unwinding in heavily built short-yen and long-Nikkei positions - highly profitable bets until the latest tumult.
These adjustments were exacerbated as some hedge funds dumped assets for cash amid the global turmoil ahead of their half-year book closing, traders said.
The unusual confluence of factors caused the dollar/yen and the benchmark Nikkei stock average on Thursday to retreat to levels prior to the BOJ's bold reflationary scheme unveiled on April 4.
Uncertainty about near-term direction was evident in dollar/yen one-month implied volatility, a measure of expected price swings and a gauge of options pricing, jumping to its highest level since March 2011 on Thursday.
The dollar was down 0.5 percent at 94.93, off the session low of 94.43 but retreating from a high of 95.80 yen set in early Asian trading. The dollar fell to a 10-week low of 93.75 overnight, bringing it down about 8 percent from last month's 4-1/2-year peak of 103.74 yen.
The dollar index against a basket of six major currencies steadied just above a four-month low of 80.50 hit on Thursday.
U.S. crude futures were nearly flat at $96.67 a barrel and Brent eased 0.3 percent at $104.69.