GLOBAL MARKETS-Asian shares edge up; RBA minutes lift Aussie
* MSCI Asia ex-Japan up; Nikkei hits 7-1/2 week high after holiday
* U.S. dollar index wobbles, but holds off last week's lows
* Aussie dollar surges after c.bank says stance appropriate
TOKYO, July 16 (Reuters) - Asian shares inched higher on Tuesday, taking their cue from U.S. stocks after weaker-than-forecast U.S. retail sales growth backed the view that the Federal Reserve will hold off reducing its bond-buying stimulus anytime soon.
MSCI's broadest index of Asia-Pacific shares outside Japan added about 0.1 percent, while the U.S. dollar index edged lower.
The Australian dollar surged half a U.S. cent after the Reserve Bank of Australia said in the minutes of its July policy meeting that the current policy stance was appropriate for the time being.
Investors await Fed Chairman Ben Bernanke's twice-yearly monetary policy report to the Congress on Wednesday and Thursday for more clues on the U.S. central bank's policy outlook.
"The testimony is a venue to explain the Fed board's thinking, rather than Bernanke's own ideas. So I would expect his remarks to be a bit more hawkish than last week," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
Citigroup's strong earnings helped the S&P 500 end higher on Monday for an eighth straight day, the longest such streak since mid-January. The S&P 500 and the Dow Jones industrial average both closed at record highs on Monday for the third consecutive session.
The Nikkei share average, which touched a 7-1/2 week high, was up 0.6 percent, catching up after Japanese financial markets were closed for a public holiday on Monday.
LOWER U.S. GROWTH EXPECTATIONS
Data on Monday showed that U.S. retail sales increased 0.4 percent last month, half of the rise economists polled by Reuters had forecast. The slowdown prompted economists to downgrade their second-quarter growth forecasts to an anaemic 1 percent increase.
While the Fed is focusing on labour market improvements to determine when to begin tapering its $85 billion in monthly purchases, weakness in the consumer sector could indicate broader economic problems.
A separate report on Monday showed that growth in New York state's manufacturing sector accelerated in July.
Yields on U.S. benchmark 10-year Treasury notes were last at 2.548 percent, slightly above their U.S. close of 2.543 percent but still well below a two-year high of 2.76 percent touched on July 8.
The dollar index erased early gains and was fractionally lower at 83.028, but still far from last week's two-week low of 82.418. The index set three-year high of 84.753 last Tuesday.
The dollar edged down 0.1 percent against the yen to 99.79 yen, well below last week's high of 101.21 yen on Wednesday.
The yen could face more pressure as the week progresses, on expectations that Japan's upper house election on Sunday will result in a big victory for the ruling party of Prime Minister Shinzo Abe, giving him more support to pursue his aggressively reflationary policies.
The euro inched up to $1.3072, moving away from last week's three-week high of $1.3201. But a slide in German exports as well as political wrangling over austerity measures in Portugal pressured the common currency's upside, as did fresh concerns about Spain's political and financial woes.
Spanish Prime Minister Mariano Rajoy on Monday rejected stepping down after opposition leaders called for him to quit over a ruling party financing scandal.
The political turmoil came against a backdrop of a deepening credit crunch that threatens banks and the broader economy, the International Monetary Fund warned in a report on Monday.
The Australian dollar surged about 0.8 percent to $0.9165 , taking back lost ground after it fell below 90 U.S. cents on Friday.
Markets interpreted minutes of the RBA July meeting - at which the cash rate was kept at a record-low 2.75 percent - as showing less urgency to cut rates than some had anticipated. As a result, swap rates shaved the probability of a rate cut in August to 53 percent, from 63 percent. 1/2ID:nL4N0FL151 3/8
Strategists at Barclays said in a note to clients that they continue to prefer taking short positions in the Australian dollar against its U.S. counterpart, in light of Australia's dependence on raw material shipments to China. China is Australia's single biggest export market.
Data on Monday showed that China's second-quarter economic growth cooled to 7.5 percent from the year-earlier period from 7.7 percent in January-March, in line with expectations.
Commodity markets were mixed in the wake of the Chinese data, relieved it did not disappoint but finding no fresh buying incentives.
Copper added 0.4 percent to $6,947.50 a tonne, while U.S. crude slipped 0.2 percent to $106.10 a barrel.
Spot gold edged down to $1,279.26 an ounce, after falling slightly on Monday.