* Japan's Nikkei records biggest weekly fall since late Jan
* Market, flows data shows investors move to sidelines - EPFR

By Lincoln Feast

SINGAPORE (Reuters) - Asian shares dropped on Friday, weighed by uncertainty on earnings and economic recovery prospects, while prices for commodities such as oil and copper looked to build a floor after recent declines.

Investor caution also kept currency trade subdued with the yen holding below this week's five month peak versus the dollar, while the euro lost ground against both the dollar and the yen.

With the summer holidays kicking off in the northern hemisphere and the second-quarter earnings season beginning, market and fund flows suggested many investors were heading to the sidelines, fund tracker EPFR Global said.

Japan's Nikkei average closed down just 0.04 percent, closing lower for the eighth straight session and with a weekly loss of 5.4 percent ending its worst week since late January.

"Bargain hunters are tip-toeing in after the market sank rapidly over a short period of time, with relief coming from the yen's stalled advance," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo.

"But from a broader perspective the market is still in an adjustment phase, with participants wanting to see how corporate earnings pan out first."

Japan's weak domestic demand and reliance on exports to China, the United States and Europe has this year seen the Nikkei underperform MSCI's measure of stocks elsewhere in the Asia-Pacific region, which fell less than half a percent on Friday.

The Nikkei is up a modest 4.8 percent year-to-date, compared with a 27 percent rise in the regional index and a whopping 72 percent in China's Shanghai Composite index, which dipped 0.3 percent on Friday.

Shares in Hong Kong also fell, but investors piled into new listings on both bourses, boding well for the languid primary market.

China's first batch of initial public offerings in 10 months listed in Shenzhen on Friday, with the new listings doubling intraday in hectic trade, while Hong Kong's new listing Amber Energy soared on massive interest with the retail portion of its issue oversubscribed 1,247 times.

Indian shares lost nearly 2 percent on worries about the economy and poor monsoons, but outsourcing bellwether Infosys Technologies rallied after its quarterly profit beat market forecasts.

Shares in Seoul fell 0.2 percent while Singapore closed flat.

Sydney and Taipei bucked the regional downtrend though not by much.

Australian stocks rose 0.8 percent as National Australia Bank led a late run higher in financial stocks, adding to gains in miners such as Rio Tinto Ltd on higher metal prices.

Taiwan stocks ended up 0.3 percent, with chipmaker UMC leading gains in technology shares after it reported an annual rise in June sales.

Stocks globally enjoyed a powerful rally in the second quarter but have run out of steam since mid-June amid concerns that any economic recovery will be slow and patchy, reigniting demand for government bonds.

U.S. Treasuries, hit by profit-taking overnight, rose in Asian trade, and the two-year Japanese government bond yield fell to its lowest level in 3-{ years on growing speculation that the Bank of Japan will extend its corporate finance support measures beyond September at its policy meeting next week.

The two-year JGB yield fell 1.5 basis points to 0.225 percent, the lowest since November 2005 after wholesale prices data showed deflation deepening in the world's second-largest economy.

The renewed uncertainty about the global economy drove investors to the yen this week, pushing the Japanese currency to a five-month high versus the dollar.

Currency trade has been choppy since, taking its cue from equities.

"People don't know what is happening at the moment. From now on it depends on share market movement," said Jun Kato, senior chief analyst at the Shinkin Central Bank Research Institute. "People want to watch U.S. companies' performance in the second quarter."

The dollar rose broadly and the yen hovered near the week's peaks against other major currencies.

The yen hit a five-month high against the dollar this week and surged to two-month highs against the euro and Australian dollar as investors unwound bets in riskier assets that they made using the low-yielding Japanese currency.

It lost a chunk of those gains on Thursday but then held its ground as the other currencies lost momentum and U.S. S&P stock futures signalled a weak start to Wall Street later.

"It's back to the risk aversion story, in which the dollar and yen gain," said Christian Lawrence, currency strategist at RBC Capital Markets.

The yen gained in particular this week as the dollar's status came under scrutiny, although reaction was muted to calls from China for a review of the reserve currency system at a meeting of world leaders on Thursday.

The dollar index, which tracks performance against a basket of six major currencies, was up about 0.8 percent.

U.S. light crude, which has fallen almost 20 percent since hitting a peak above $73 a barrel in late June, continued its slide to drop below $60 a barrel.