Asian stocks hit a five-week high on Tuesday after U.S. Federal Reserve Chair Janet Yellen gave a largely upbeat assessment on the U.S. economic outlook, while the dollar declined on diminishing expectations of interest rate increases in coming months.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.5 percent, taking its gains to 6 percent in two weeks, as investors judged the Fed's cautious stance as well-suited to equities.

"Yellen's comments yesterday downplayed the impact of the jobs data last week and gave a cautious sense of optimism on the outlook for the U.S. economy," said Fan Cheuk Wan, head of investment strategy, Asia at HSBC Private Bank.

"Her comments point towards the world remaining stuck in a low-growth and low-yield environment which should be positive for risky assets and keep the dollar soft," she said.

The Fed chief said last month's jobs report was "disappointing" but warned against attaching too much significance to the payrolls data in isolation.

World markets cheered her comments with U.S. stocks closing a shade below a recent record.

In Asia, Hong Kong's stock market led regional gainers with the broad gauge .HSI rising 1 percent as investors hunted for bargains in one of the cheapest equity markets in the region.

Money market futures <0#FF:> reduced bets on a July rate hike further, to around 20 percent, from 30 percent before Yellen's comments. They were pricing in about a 60 percent chance of a rate hike by July before Friday's weak payrolls data.

With the Fed suggesting it was in no rush to increase interest rates, bond yields slipped with 10-year U.S. Treasury yields retreating to 1.74 percent from 1.84 percent last week. Benchmark yields are down 63 basis points so far this year.

Lower yields on government debt translated into further inflows into relatively higher-yielding corporate debt with an index of Asian bonds tracked by JP Morgan .JPMACI rising to fresh highs.

Inflows into Asia-focused equity funds showed a noticeable pickup in recent weeks, according to Thomson Reuters data.

The dollar index .DXY =USD hit a four-week low of 93.745 before bouncing back to 94.066.

The euro EUR= eased to $1.13520 after having scaled a four-week high of $1.3930 while the yen JPY= also stepped back to 107.545 per dollar from Monday's five-week high of 106.35.

The Australian dollar AUD=D4 changed hands at $0.7365, below Monday's four-week peak of $0.7392 ahead of the Reserve Bank of Australia's policy decision at 0430 GMT.

The central bank is widely expected to keep rates on hold after a rate cut last month.

Elsewhere, oil prices held firm after crippling attacks on Nigeria's oil industry and fresh draws in U.S. crude stockpiles.

Global crude benchmark Brent futures LCOc1 hit a seven-month high of $50.83 per barrel on Monday before easing to $49.57 early on Tuesday.

U.S. West Texas Intermediate (WTI) crude CLc1 stood firm in Asia at $50.39 per barrel, after rising 2.2 percent on Monday, its largest gain in three weeks.