* Fall in Vix futures suggest position unwinding over for now
* Dollar broadly weak as Trump's policy seen stoking inflation
By Hideyuki Sano
TOKYO, Feb 16 (Reuters) - Asian shares extended their recovery from two-month lows into a fifth day on Friday as the Wall Street market volatility gauge fell, while the U.S. dollar was undermined by various worries including rising inflation.
U.S. debt yields stood near multi-year highs. Two-year note yields hit a 9 1/2-year high as bond prices fell on Federal Reserve officials' signalling that recent volatility in U.S. stocks would not stop them raising interest rates in March.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, though many Asian markets will be closed on Friday for the Lunar New year.
Japan's Nikkei rose 0.5 percent.
Measured by the MSCI's broadest gauge of the world's stocks covering 47 markets, global shares have reclaimed more than half of the 10.7 percent losses incurred in their slump from a record intraday high on Jan 29 to their four-month intraday low hit a week ago.
Investors were reassured by a fall in the Wall Street Vix index, the "fear gauge" that measures the one-month implied volatility of U.S. stocks.
The index dropped below 20 for the first time since its spike to 2 1/2-year high of 50.3 last week, a jump that caused massive losses among investors who bet equity markets would be stable on a combination of solid economic growth and moderate inflation.
Vix futures prices fell back to more normal patterns, suggesting that the loss-cutting and position unwinding of "volatility short" strategies had run its course for now, easing investors' nerves.
The U.S. dollar, on the other hand was fragile, with its index against a basket of major currencies on the verge of sliding to the lowest since late 2014.
The dollar index stood at 88.58, just above its three-year low of 88.429 set on Jan. 25.
While there is no strong consensus yet on what is driving the dollar's weakness, many point to worries President Donald Trump's tax cuts and fiscal spending could stoke future inflation and erode the value of the dollar.
"His protectionist policies could also fan inflation. Markets appear to have calmed down for now but fundamentally it is different from last year," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.
"You could say that right now, rather than stocks rising around the world, it is the dollar falling against almost everything," he added.
The euro fetched $1.2496, just shy of a 3-year high of $1.2538 hit on Jan. 25.
The dollar changed hands at 106.11 yen, after having fallen to as low as 106.03 on Feb 15, its lowest level since November 2016.
The South African rand hit a three-year high of 11.6025 to the dollar on Thursday on hopes the resignation of President Jacob Zuma had paved the way for new leaders to speed up economic growth.
The dollar's fall came even as U.S. bond yields remained near a multi-year high.
The 10-year U.S. Treasuries yield hit a four-year peak of 2.944 percent on Thursday and last stood at 2.906 percent.
Shorter-dated yields also rose as investors grew convinced that the correction in stock prices in recent weeks would not prevent the Fed from raising interest rates in March and twice more this year.
The two-year yield rose to as high as 2.213 percent, its highest since Sept 2008.
Oil prices maintained this week's gains, with U.S crude futures trading at $61.49 per barrel, up 3.9 percent so far this week.
Elsewhere, virtual currency bitcoin recovered the $10,000 mark for the first time in two weeks to trade at $10,150 , gaining 71 percent from its near three-month low of $5,920.7
Reporting by Hideyuki Sano; Editing by Eric Meijer