Asian stocks rallied for a second day and the euro held near two-month highs on Friday, supported on positive U.S. data and after the European Central Bank's offered upbeat view of the euro zone's recovery.

The MSCI index of Asia Pacific ex-Japan stocks <.MIAPJ0000PUS> rose 0.9 percent, on track for its biggest weekly gain in seven months, with the consumer durables <.MIAPJCD00PUS> and energy sectors <.MIAPJEN00PUS> outpeforming.

Tokyo's Nikkei share average <.N225> firmed 0.4 percent, holding above a key support level and after pulling away from a seven-month low. It is now poised to book its best weekly performance in about four months.

The market has factored in worries about Europe and the possibility of a double dip in the U.S. economy, and it's now most likely found a floor, said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

Overnight, Wall Street's made a late-session rally after first-time U.S. jobless claims dropped to their lowest level in two months and handful of large retailers reported solid sales.

Interest rate increases by the South Korean and Malaysian central banks have underlined the growing confidence about Asia's recovery after the International Monetary Fund said a double-dip world recession was unlikely.

Taiwan's main TAIEX share index <.TWII> is on track to record its biggest weekly gain in 10 months.

The euro was flat at $1.2684, after it broke past resistance at $1.2673 on Thursday when it advanced nearly 0.5 percent against the U.S. dollar to two-month highs and jumped over 1 percent against the low-yielding yen.

ECB President Jean-Claude Trichet said on Thursday he expects the euro area economy to grow at a moderate and still uneven pace in an environment of high uncertainty.

The euro also received a boost from details about Europe's bank stress tests which heartened investors who saw criteria for the checks were no worse than markets expected.

The Australian dollar steadied after hitting a 2-week high on Thursday on solid Australian job data, which brought back the risk of near-term rate increases. The New Zealand dollar also held near its highest level since June 28.

U.S. crude for August rose 29 cents to $75.73 a barrel on Friday on the New York Mercantile Exchange, after touching an intraday peak of $76 on Thursday, the highest price this month. ICE Brent gained 38 cents to $75.09.

(Additional reporting by Aiko Hayashi in Tokyo; Editing by Kazunori Takada)

Japan Energy Nikkei 225