* Stocks rally on better risk sentiment, Nikkei aided by lower yen
* Yellen upbeat on economy, emphasises continuity of policy
* US House passes debt limit, diminishes danger of default
* China trade data a hurdle, downside risk given base effect
SYDNEY, Feb 12 (Reuters) - Asian shares rallied for a fourth straight session on Wednesday as risk appetites were whetted by an optimistic economic outlook from Federal Reserve Chair Janet Yellen, which diminished the need for safe havens such as the yen and bonds.
Regional markets face a potential pitfall later Wednesday when China releases trade figures for January. Any weakness will stoke concerns about a slowdown and the risks would seem to be sizable given January last year was a very strong month for export growth, making for a tough comparison.
For now, investors took a leaf from the strong performance of Wall Street and lifted MSCI's broadest index of Asia-Pacific shares outside Japan 0.15 percent.
Australia's main index added 0.5 percent while Nikkei futures hinted at opening gains of 200 points, thanks in part to a broad retreat in the yen.
The Dow ended Tuesday up 1.22 percent, while the S&P 500 gained 1.11 percent to post its best four-day performance in 13 months.
Stocks in Canada, Europe and emerging markets also rallied as Yellen was careful to rock no boats in her first testimony to Congress. 1/2ID:nL2N0LG0S4 3/8
"Continuity in policy is the main message from Fed Chair Yellen's testimony," said John Peters, a senior economist at Commonwealth Bank of Australia in Sydney. "Equities did well in reaction to the Fed sticking with its relatively upbeat outlook on the economy."
"Crucially, the Fed hasn't downgraded its view on the U.S. recovery in light of recent data releases or volatility in markets," he added. "Further QE tapering is on the cards at upcoming FOMC meetings and U.S. yields should continue to rise."
Yields on the 10-year Treasury note were up 5 basis points at a two-week high of 2.72 percent.
Sentiment was further supported by news that the U.S. House of Representatives had passed legislation increasing Washington's borrowing authority, removing the danger of default.
A stabilisation in emerging markets also helped after the turmoil of January. The Turkish lira and the South African rand have been grinding steadily higher for the past two weeks.
The calmer mood was reflected in the VIX index of volatility, which dived 4.9 percent to 14.51, a world away from the recent peak at 21.48.
The same sea change hit the safe haven yen while boosting currencies leveraged to global growth, such as the Australian dollar. The latter was the strongest performer of all the major currencies, climbing 1.4 percent on the yen to 92.64.
The U.S. dollar added around a third of a yen to 102.58 , while the euro edged back to $1.3637.
The single currency will be sensitive to a speech by European Central Bank President Mario Draghi later on Wednesday, while the Bank of England releases a report on inflation which should include an overhaul of forward guidance. 1/2ID:nL3N0LG2GO 3/8
In commodity markets, gold extended its recent rally to reach $1,290.50 an ounce, just off a three-month peak.
Brent crude rose 8 cents to $108.71 a barrel, while U.S. crude gained 42 cents to $100.36.