Asian shares at 7-year highs, cheered by Apple earnings

TOKYO (Reuters) - Asian stocks scaled fresh seven-year peaks on Tuesday as Apple's upbeat earnings offset underlying caution ahead of the Federal Reserve's policy meeting scheduled to start later in the session.

The U.S. dollar, meanwhile, clawed back some of its losses against the euro which rose overnight on optimism for progress in debt-laden Greece's ongoing negotiations with its lenders.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 per cent in early trading to touch its highest level since January 2008. Japan's Nikkei stock index advanced 0.6 per cent.

On Monday, Wall Street ended lower after the xbenchmark S&P 500 index hit a record intraday high before reversing course, tempered by caution ahead the Fed meeting. After markets closed, Apple Inc beat Wall Street's revenue and profit forecasts.

Analysts expected no change in policy stance from the two-day Federal Open Market Committee meeting starting later on Tuesday, as recent domestic data have been weaker than forecast and a strong dollar has crimped export activities.

Market expectations for an interest rate increase have been pushed further down the road, with few investors now expecting a rate hike in June and most predicting a move later this year.

"The Federal Reserve is not expected to change monetary policy but dollar bulls can't help but worry that the central bank will take June tightening off the table," Kathy Lien, Managing Director of FX Strategy for BK Asset Management, said in a note.

The euro was in focus overnight, climbing to a three-week peak of US$1.0927, well off its 12-year nadir of US$1.0457 plumbed in mid-March. It last stood at US$1.0876, down about 0.2 per cent on the day.

Greek Prime Minister Alexis Tsipras on Monday reshuffled his team handling talks with European and IMF lenders, a move widely seen as an effort to relegate embattled Finance Minister Yanis Varoufakis to a less active role in negotiations.

The firmer euro helped knock the dollar index to a three-week low of 96.467 on Monday. The index last traded at 96.802, nearly flat on the day.

Against its Japanese counterpart, the greenback bought 119.15 yen, up about 0.1 per cent, with that currency pair seen rangebound ahead of a Japanese public holiday on Wednesday and the Bank of Japan's regular policy meeting on Thursday.

The BOJ is widely expected to hold policy steady, but there is a slim possibility that policymakers may opt to ease further if the cut to this fiscal year's inflation forecast is unexpectedly big, or if they feel the slowdown in inflation is damaging enough to warrant pre-emptive action.

In commodities trading, crude oil extended its losses made on Monday as ample global supply blunted support from the conflict in Yemen and the falling number of U.S. rigs drilling for oil. This kept traders cautious after prices reached 2015 peaks last week.

Brent was down about 0.4 pe rcent at US$64.61 a barrel, while U.S. crude about 0.6 per cent to US$56.65.