TOKYO (REUTERS) - Asia stocks shook off losses on Wall Street and edged up to record highs on Friday (Jan 19) following China's announcement of faster-than-expected fourth quarter growth, while worries over a possible US government shutdown weighed on the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.4 per cent to a record top. The index had climbed 1.3 per cent on the week, during which it rode a surge in global equities.

Optimism over the global economic growth outlook and improved corporate earnings have helped share markets rally at the start of 2018. Supporting economic confidence was data on Thursday that showed China's growth in 2017 accelerated for the first time in seven years.

Shanghai advanced 0.5 per cent to two-year peaks and Hong Kong's Hang Seng reached a record high.

South Korea's KOSPI gained 0.1 per cent, as did Japan's Nikkei.

"We are likely to see equity markets go through temporary adjustment phases. But in the longer term, it looks to be a good year for global markets," said Soichiro Monji, chief strategist at Daiwa SB Investments in Tokyo.

"It is no longer about other markets following gains by US equities. Fundamentals are strong globally, backed by major positive changes, such as the digital revolution we are currently witnessing," he said.

Wall Street fell on Thursday as losses in industrials and interest-rate sensitive sectors offset marginal gains in tech stocks. The Dow slipped 0.37 per cent, dipping from record highs.

Against the yen, the US dollar was 0.25 per cent lower at 110.840. It rose to 111.480 on Thursday before slipping on concerns over a possible US government shutdown as lawmakers struggled to cobble a federal budget deal.

The focus was on whether lawmakers can reach at least a temporary agreement to fund government operations by a deadline on Friday.

The US House of Representatives on Thursday passed a Bill to fund government operations through Feb 16 and avoid agency shutdowns this weekend when existing funding expires. However, a bitter fight broke out in the Senate after the House passage, leaving the legislation hanging in the balance.

"There is a good chance the negotiations will take place until the last minute and keep the dollar on the defensive. That said, both the Republicans and Democrats want to avert a shutdown, especially with the US midterm elections looming," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The euro rose 0.2 per cent to US$1.2260 after gaining about 0.45 per cent overnight.

The common currency advanced to a three-year peak above US$1.2300 earlier this week on expectations that the European Central Bank would take steps towards winding back on stimulus measures to normalise monetary policy. The euro's rally was tempered later as some ECB officials voiced worries about the currency's strength.

The dollar index against a basket of six major currencies lost 0.1 per cent to 90.378. It had fallen to a three-year trough of 90.113 on Thursday and was poised to shed 0.65 per cent on the week.

China's yuan breached the psychologically important 6.4 dollar level for the first time in more than two years the day after Beijing said annual growth was 6.8 per cent in October-December, slightly above forecasts.

The Australian dollar rose 0.2 per cent to US$0.8017, crawling back towards a four-month high of US$0.8023 set on Wednesday and the New Zealand dollar was little changed at $0.7301.

Brent crude futures lost 1 per cent to US$68.62 per barrel following data showing an uptick in US production. US crude oil futures slipped 1.2 per cent to US$63.19 per barrel.

US crude soared to a three-year peak near US$65.00 on Tuesday, supported by supply cuts led by the Organisation of the Petroleum Exporting Countries and a weaker dollar. But the advance has stalled as the market remains wary that output cuts will eventually trigger price hikes and lead to increased supply from shale-rich United States.

Spot gold gained 0.3 per cent to US$1,331.26 an ounce as the dollar eased. The precious metal had risen to a four-month top of US$1,344.43 on Monday on the back of the dollar's sharp downturn.