Asia Stabilizes After Sell-Off; Nikkei Rallies 1.6%

Asian equities moved off session lows on Friday, led by a stellar rebound in Japan's benchmark Nikkei index as a weak yen and rising U.S. futures offset worries over a liquidity crunch in China and a scaling back of U.S monetary stimulus.

The Nikkei crossed the 13,000 level to rally as much as 2 percent following a 1.7 percent slide earlier in the session. Australian equities rose above a one-week low, and China's Shanghai Composite crept down 0.5 percent after losing as much as 1 percent. South Korea's benchmark Kospi remained the session's laggard, hitting a near one-year low.

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For the week, the Nikkei notched up gains of over 4 percent while the Shanghai Composite was the region's worst-performing index, down 4 percent.

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China's seven-day bond repurchase rate fell to 8 percent on Friday after climbing as much as 12 percent the previous day. The move helped to bolster sentiment in Asia by easing concerns over a liquidity squeeze in the mainland.

(Read More: What's Really Behind China's Cash Crunch)

Commodities also underpinned Asia's recovery story with gold rising above a three-year low, and Brent crude oil prices staying above $102 a barrel.

Nikkei Jumps 1.6%

A weaker yen helped Japanese stocks re-enter positive territory. Dollar-yen traded at the 97.7 handle, which saw some exporter stocks reverse earlier losses. Suzuki Motor jumped nearly 4 percent after trading in negative territory throughout the session.

Market heavyweight Fast Retailing surged 5 percent and metals manufacturer Dowa Holdings jumped over 8 percent.

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Investors were awaiting a speech by Bank of Japan Governor Haruhiko Kuroda at a bank conference in Tokyo later on Friday for any hints of additional measures to boost the Japanese economy.

Shanghai Down 0.5%

Speculation that the People's Bank of China provided guidance to state lenders about increasing cash supplies boosted smaller banks. Bank of Nanjing added 1.7 percent while Everbright Bank inched up nearly 0.7 percent.

However, large banks remained under pressure with China Construction Bank down 3.7 percent while ICBC fell 1 percent.

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Despite paring losses, the benchmark index closed below the 2,080 mark at a fresh 2013 low.

Sydney Eases 0.4%

Australia's benchmark S&P ASX 200 index hit a one-week low at 4,683 points but closed well-above those levels. Still, lower metals prices weighed on the resource-heavy index.

Medusa Mining lost 8 percent, while Mirabela Nickel fell 7.7 percent after London copper prices hit a new 20-month low on Friday.

However, the Australian dollar recovered to move off the previous day's three-year low against the greenback. The currency rose above the $0.92 handle after shedding as much as 1 percent overnight to hit $0.9163, its weakest level since September 2010.

(Read More: Slump Strips Aussie Dollar of 'Poster Child' Status)

Kospi Falls 1.5%

Seoul's benchmark index traded at its lowest levels since July 2012, one day after hitting a new 2013 low, led by declines in chemicals and financials.

KPX Chemical fell 8.7 percent while LG Chemical fell 3.5 percent. Amongst brokerages, Mirae Asset tumbled 7 percent while Woori Finance and Daewoo Securities were lower by 2 percent.

Technology stocks also extended losses with LG Display extending the previous day's slide by 3 percent and LG Electronics lower by 2.7 percent.

The Kospi's Relative Strength Index (RSI) fell to 23.9, from a reading of 55 at the beginning of June. A figure below 30 signals oversold territory.

By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC