GLOBAL MARKETS-Asian shares hit near 5-mth high on U.S. deal hopes
* U.S. Senators close in on deal as Oct. 17 deadline looms
* Markets still cautious until deal finalised
* Asian ex-Japan shares hit a near 5-month high
* Yen's rally vs dollar fizzles
TOKYO, Oct 15 (Reuters) - Asian shares rose to their highest in nearly five months on expectations of an imminent deal to reopen the U.S. government and avert a possible debt default, though the squabbling in Washington kept markets on edge ahead of Thursday's deadline.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.6 percent on Tuesday morning to its highest level since May 23. Tokyo's Nikkei share average also gained 0.6 percent, hitting a two-week peak.
A number of markets in the region, including Singapore, Indonesia and India, were closed for holidays.
On Wall Street, signals that politicians were heading towards a deal that would avert a possible U.S. default pushed the S&P 500 index up 0.4 percent to its highest close in nearly one month.
U.S. S&P 500 E-mini futures added 0.2 percent early on Tuesday, indicating a firmer open if the gains were to be maintained. U.S. Treasury futures slipped 5 ticks.
The U.S. debt ceiling needs to be raised by Oct. 17.
"Risk sentiment remains resilient despite the lack of a clear breakthrough in the U.S. debt ceiling and government shutdown negotiations," analysts at BNP Paribas wrote in a note.
"The Japanese yen's initial rally has now fully reversed although in the absence of an agreement the near-term risks are for a stronger yen," they added.
The dollar was at 98.61 yen, recovering from a low of 98.05 hit on Monday. It also stabilised at $1.35560 to the euro after slipping 0.1 percent on Monday.
Against a basket of major currencies, the dollar was up 0.1 percent.
The fiscal plan under discussion by senators would raise the $16.7 trillion debt ceiling by enough to cover U.S. borrowing needs at least through mid-February, according to a source familiar with the negotiations. It would also fund government operations through the middle of January.
But any deal needs approval in the House of Representatives, where conservative Republicans have insisted any continued funding must include measures to undercut President Barack Obama's healthcare programme -- non-negotiable for Democrats.
JPMorgan analysts said market reaction to the U.S. budget impasse has been muted so far, though it did not believe investors were complacent.
"Our sense is not complacency, but more a belief that a true default, beyond a technical delay in payments lasting several days, is highly unlikely, and a lack of clarity of what such a default would mean for markets beyond a sense that it will be bad," they wrote in a note.
"Market participants appear to be preparing for the event risk of a delayed payment of U.S. Treasury coupons and principals by adding liquidity and avoiding securities maturing around the debt ceiling deadline."
In the commodity markets, gold fell 0.5 percent to around $1,267 an ounce.
U.S. crude slipped 0.1 percent to around $102 a barrel, giving up some of Monday's gains as traders bought contracts to cover short positions ahead of a possible deal in Washington.