Australian shares climbed to a five-year peak over-night, drawing confidence from another record high on Wall Street as investors bet the Federal Reserve will put off winding back its cheap money policies until next year. Many analysts think the Fed will be wary of scaling back its $85 billion-a-month bond-buying programme until the economic impact of a 16-day partial shutdown of the US government is clearer. This view kept the dollar on the defensive.

Investors face a deluge of US data this week as reopened government departments catch up on their work, with tomorrow’s September nonfarm payrolls report seen as the most important. US employers are expected to have taken on 180,000 workers last month, with the unemployment rate steady at 7.3 per cent, a Reuters poll showed.

"Such strong readings would again ignite a debate on an imminent start of US tapering, but given that the full impact of the recent shutdown may take some further time to emerge, we continue to see tapering in first quarter next year," analysts at Societe Generale wrote in a note, forecasting employment would rise by a firm 240,000.

Australia’s S&P/ASX 200, also supported by data last week showing an improvement in economic growth in China -- its biggest export market -- scaled a five-year peak, taking the index close to “overbought” territory, an indication that there could be a near-term pullback.

China's CSI 300 index advanced 1.5 per cent, while MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 per cent to a five-month high. In New York, the benchmark S&P 500 index rose 0.7 per cent on Friday to close at a second-straight record high, capping its biggest weekly gain in three months on stronger-than-expected earnings from the likes of Google and Morgan Stanley.

Tokyo’s Nikkei gained 0.7 per cent after earlier hitting a three-week high in relatively light trade. It is up 41 per cent this year, spurred by fiscal and monetary stimulus, and its 30-day implied volatility has risen sharply above that in the United States and Europe, Datastream figures showed.

The dollar index, which tracks the greenback against a basket of major currencies, was at 79.686 on Monday, not far from an eight-month low of 79.478 touched on Friday. The dollar was steady at $1.36765 to the euro after hitting an eight-month low at $1.3704 in the previous session, and up slightly at 98.01 yen. Barclays Capital analysts said a strong reading in the US jobs data could see markets pare back expectations of a delay in the Fed's tapering, which would lead to a rally in the dollar. "We forecast nonfarm payrolls to increase by 200,000 and the unemployment rate to decline to 7.2 per cent. Results in line with our forecast would likely lead to a broad US dollar rally, as expectations for a taper delay are pared back," they wrote in a note.

In the commodity markets, Brent crude was flat at around $109.9 a barrel, building on Friday’s 0.8 per cent rise. Gold gained 0.2 per cent to around $1,318 an ounce, having posted its best weekly rise in two months last week.

Reuters