Caution prevailed in financial markets on Friday ahead of U.S. President-elect Donald Trump's inauguration, even as China's fourth-quarter economic growth beat expectations and Federal Reserve Chair Janet Yellen took a less hawkish policy stance.

People are reflected in a display showing the Nikkei average (top in L) and the NASDAQ average of the U.S outside a brokerage in Tokyo, Japan, November 7, 2016.

China's fourth-quarter gross domestic product growth came in at 6.8 percent, versus forecasts of 6.7 percent, supported by higher government spending and record bank lending. The data helped China shares but did not move regional markets.

The world's second-largest economy expanded 6.7 percent in 2016, the National Bureau of Statistics said, in line with forecasts.

While the robust headline growth may soothe investors, concerns are growing about whether Beijing can contain the financial risks from an explosive expansion in debt fueled by years of government stimulus.

A cooling housing market and painful structural reforms, as well as pressure on exports if Trump fulfils his protectionist promises, are also key risks for China in 217.

The dollar fell after Federal Reserve Chair Janet Yellen said that gradual monetary adjustments were prudent, taking a less hawkish tone than anticipated.

Her statement was seen as less aggressive than a Wednesday speech in which she cautioned that waiting too long to raise rates could risk "a nasty surprise down the road – either too much inflation, financial instability, or both," amid comments by other Fed officials that seemed to favor faster rate hikes.

The greenback slipped 0.1 percent to 114.665 yen JPY=D4. On Thursday, it surged as much as 0.8 percent on upbeat U.S. data pointing to brightening economic prospects, before closing less than 0.2 percent higher at 114.82 yen as concern about Trump's policies returned.

U.S. homebuilding rebounded sharply in December amid stronger demand for rental housing, and the number of Americans filing for unemployment benefits fell to near the 43-year low touched in mid-November.

"The dollar could fall if Trump pushes forward his protectionist rhetoric in his inauguration speech," said Minori Uchida, chief FX analyst at Bank of Tokyo Mitsubishi UFJ. "Some investors also expect more details on his policies, so the dollar could also slip if Trump does not mention any specifics."

The dollar index .DXY, which tracks it against a basket of six major global peers, pulled back 0.2 percent to 100.96 on Friday. On Thursday, it pared a 0.8 percent gain to close up 0.2 percent.

The 10-year U.S. Treasury yield US10YT=RR fell 0.2 percent to 2.4646, after spiking to as high as 2.496 on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.2 percent, and looked set to end the week 0.1 percent lower.

Japan's Nikkei .N225 reversed earlier gains to trade flat as the yen strengthened, and was on track for a 1.1 percent weekly loss.

Australian stocks retreated 0.6 percent, heading for a 1.1 percent decline for the week. South Korean shares .KS11 slid 0.2 percent, poised to end the week 0.4 percent lower.

U.S. stocks were also restrained, with the major indexes posting losses of as much as 0.4 percent, and the Dow Jones Industrial Average .DJI down for its fourth straight session.

"There's been a lot of positive news priced into the market so it's taking a break on the equities side," said Wade Balliet, chief investment strategist of the Bank of the West in Denver.

Amid questions about whether Trump will deliver on his pro-business promises, including tax cuts, fiscal stimulus and looser regulation, investors are "getting nervous trying to piece together what the policies will be," he said.

The euro rose on Friday, extending gains following initial losses after European Central Bank chief Mario Draghi played down a recent rise in euro zone inflation, as investors parsed his statement and noted he had announced no changes to policy.

The common currency advanced 0.2 percent on Friday to $1.06835 EUR=EBS. It dropped as much as 0.4 percent on Thursday, before retracing its steps to close 0.3 percent higher.

In commodities, oil rose after the International Energy Agency said oil markets had been tightening even more as cuts agreed by producers took effect. Still, gains were tempered by concerns about swelling U.S. inventories.

U.S. crude CLc1 added 0.3 percent to $51.54 per barrel, pulling further away from Wednesday's one-week low.

Spot gold XAU= climbed 0.2 percent to $1,207.66 an ounce, set for a weekly gain of 0.8 percent.

Source: Reuters