China's 2% Rally Sparks Turnaround in Asia

Asian stocks reversed earlier losses on Friday led by a 2 percent rally in Shanghai as investors cheered news that the yuan's trading band may be widened, which offset bearish sentiment triggered by weak U.S economic data.

The Hang Seng jumped 2.3 percent to snap a five-day losing steak and the Shanghai Composite hit a near three-week high.

Elsewhere, the Nikkei 225 closed up 0.7 percent after losing over 1 percent in the previous session, the S&P ASX 200 closed off session highs and the Kospi rebounded from an earlier 2013 low.

The Shanghai market was Asia's best performer for the week, notching up gains of 1.7 percent while Australia's benchmark was the worst, losing 1.6 percent.

Reports revealing declining factory activity in the U.S contributed to initial losses in Asia, as well as a gauge of future economic activity by the Conference Board that dipped in March for the first time in seven months.

However, comments from China's central bank suggesting a widening of the yuan's trading band fueled the mainland's rally and cut Asian losses.

(Read More: Is a Change in China's Currency Policy Imminent?)

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Shanghai-listed financials lifted mainland stocks to their highest levels in four sessions on the news. Founder Securities rallied 9 percent while Minsheng Bank jumped 8 percent.

Hong Kong-listed lenders also added to the positive momentum with Bank of China rising 3 percent and ICBC adding nearly 4 percent.

Meanwhile, a 9 percent rally in Lenovo helped spur the Hang Seng's gains after reports surfaced that the Chinese PC maker may purchase IBM's server hardware operations.

Nikkei Crosses 13,300

The yen's descent to hover around 98.6 per dollar lifted sentiment in Tokyo. The moves comes ahead of a Group of 20 (G-20) meeting this weekend where analysts largely expect the Japanese central bank to escape any criticism.

"I think they [G-20 participants] made it quite well known that Japan's got a free pass on this one," said Peter Whitley, senior FX analyst at Thomson Reuters.

(Read More: Any G-20 Criticism Unlikely to Derail Yen's Fall)

"Everybody has come out and said this is the right thing for Japan to do but obviously behind the scenes is where all the action is. There will be a lot of niggling but it won't transpire into the real end of the market," he added.

Kospi Off Lows

In Seoul, a 3 percent rally in shares of SK Hynix paved the way for a recovery in chip suppliers after a sharp sell off in the previous session. LG Electronics closed up over 2 percent.

Early losses in the sector came after Apple closed below $400 a share for the first time since December 2011. Disappointing second-quarter earnings guidance from eBay and IBM's lower-than-expected profits also weighed.

The benchmark index earlier touched a fresh low for 2013 at 1,889 points but managed to close above the 1,900 mark.

Resources Recover

Australia's benchmark index moved off a session high of 4,960 to close up 0.1 percent as commodities paused in their sell-off. Copper steadied from an 18-month trough and gold rose on improved physical demand.

Western Areas soared 7.6 percent after declining as much as 12 percent in the previous session while global miners BHP Billiton reclaimed 2.4 percent and Rio Tinto rallied over 4 percent.

"It is the end of the week so be careful with the light trade today," warned Evan Lucas, market strategist at IG Markets. "Remember that several major macro-events are occurring over the weekend, including the G-20 and IMF meeting."