Asian shares up on hopes of US fiscal cliff deal

Asian shares rose and the euro hovered around multi-month highs on Wednesday as signs of progress in resolving the US "fiscal cliff" budget crisis boosted demand for riskier assets.

Expectations of more aggressive monetary easing under Japan's new government also drove stocks higher, with the Bank of Japan (BOJ) starting a two day meeting on Wednesday.

The BOJ will ease monetary policy this week and consider adopting a 2 percent inflation target in January, double its current price goal, sources say, after pressure from next Prime Minister Shinzo Abe for stronger efforts to beat deflation.

Tokyo's Nikkei share average opened up more than 1 percent, topping 10,000 points for the first time since April.

"The market is already in overbought territory, but investors are increasingly being alarmed that there is a risk of not having Japanese stocks in their portfolios," said Hiroichi Nishi, general manager at SMBC Nikko Securities.

Australian shares rose 0.6 percent to a new 17-month high, lead by miners and banks. MSCI's broadest index of Asia Pacific shares outside Japan edged up 0.1 percent.

On Wall Street the S&P 500 rose more than 1 percent on Tuesday to notch up the index's best two-day run in a month, on growing confidence a deal can be reached to avoid a US fiscal cliff of spending cuts and tax rises in January.

The euro was steady around USD 1.3226, just shy of its highest since May, and against the yen it fetched 111.53, having risen as far as 111.60, its highest since late August 2011.

"Unless US fiscal cliff talks take an unexpected turn for the worse, we believe that EUR/USD will meet our 1.3300 year-end target," analysts at BNP Paribas wrote in a note.

The greater appetite for riskier assets also supported oil, with US benchmark crude edging up to USD 88 a barrel.