By Chikako Mogi

TOKYO (Reuters) - Asian shares eased on Monday with sentiment hit by selling in commodities triggered by a strong dollar, which rose to a fresh 4-1/2-year peak against the yen on the back of growing confidence in the U.S. economy.

Losses in shares were likely to be limited after U.S. stocks rallied to record highs on Friday.

U.S. labor market data has pointed to a steady recovery trend in the world's largest economy, boosting the dollar and fuelling speculation that the Federal Reserve could scale back its aggressive monetary stimulus aimed at supporting growth.

The dollar's firmness was also cemented after Japan avoided criticism from its peers for pursuing bold reflationary policies which have resulted in a steady decline of the Japanese currency.

Group of Seven finance officials agreed on Saturday to redouble efforts to deal with failing banks and gave a green light to Japan's drive to galvanize its economy.

Having urged Tokyo for years to do something to revive its economy, other world powers are not in a position to complain now that it is doing so. Also, central banks such as the Federal Reserve and Bank of England have printed money in the way the Bank of Japan is now.

"If international peers criticize the yen's weakness, investors who are on the nervous side could stop chasing the market higher. Now, such concerns are receding," said Kenichi Hirano, a strategist at Tachibana Securities.

Japanese stocks have surged on the back of the weakening yen as it improves earnings prospects for exporters and underpins the export-reliant economy.

The Nikkei stock average <.n225> opened 1 percent higher. It scaled its highest since January 2008 on Friday. <.t></.t></.n225>

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> eased 0.3 percent. The index rose 0.8 percent last week.</.miapj0000pus>

Australian shares <.axjo> were down 0.1 percent after closing at a five-year high on Friday, while South Korean shares <.ks11> opened down 0.4 percent.</.ks11></.axjo>

Bae Sung-young, a market analyst at Hyundai Securities, said investors in South Korea were watching the yen and may prefer defensive stocks over market heavy-weights such as auto and technology exporters.

The yen slid to a fresh 4-1/2-year low against the dollar of 102.15 yen in Asia on Monday morning, having earlier hit its highest point since January 2010 against the euro at 132.385.

On Friday, the Dow Jones industrial average <.dji> and the Standard & Poor's 500 Index <.spx> ended at record highs while the pan-European FTSEurofirst 300 index <.fteu3> closed at its best level since mid-2008.</.fteu3></.spx></.dji>

The stock rally pushed benchmark 10-year U.S. Treasury yields up to their highest in about a month of 1.895 percent on Friday.

The dollar's strong performance took the shine off gold, which typically serves as an alternative to the U.S. currency. Spot gold fell 0.7 percent to $1,438.29 an ounce.

U.S. crude futures fell 0.5 percent to $95.59 a barrel.

Removing a potential source of political instability in the Asian region, Pakistan's Nawaz Sharif, toppled in a 1999 military coup, jailed and exiled, has made a triumphant election comeback over the weekend and looks set to form a stable government capable of implementing reforms needed to rescue the fragile economy.

(Additional reporting by Ayai Tomisawa in Tokyo and Jungyoun Park in Seoul; Editing by Stephen Coates)

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