* Asian stocks up, Australia hits five-year high
* Yen broadly softer as risk appetite improves
* European shares seen opening higher
SYDNEY, Oct 28 (Reuters) - Asian stocks rose on Monday with Australia scaling a five-year peak after a record high finish on Wall Street helped offset worries about tighter credit in China, while investors gave the safe-haven yen a wide berth.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent, recovering a chunk of last week's 1.1 percent loss -- the biggest in two months -- that was driven by concerns that China may tighten monetary policy to keep prices under control.
European shares were seen opening higher with financial spreadbetters expecting gains of around 0.3-0.5 percent for Germany's DAX, France's CAC 40 and Britain's FTSE 100.
"Yet more gains in the U.S. on Friday and a positive handover from Asia are set to fuel the bulls on the European open," Jonathan Sudaria, trader at London Capital Group, said in a trading note.
Japan's Nikkei climbed 2.2 percent, clawing back most of Friday's 2.7 percent drop, while Australian shares put on 1.0 percent to end at a five-year high.
Hong Kong's Hang Seng lagged, adding a modest 0.6 percent, and mainland Chinese stocks were flat, highlighting underlying concerns about China's attempts to cool consumer inflation and runaway property prices.
"The focus this week will be earnings, China's money rates and the PMI number at the end of the week," said Jackson Wong, Tanrich Securities' vice-president for equity sales.
"Flows are quite slow today and investors will likely stay on hold for the rest of this week with so much China policy uncertainty at this point," he added.
Last week, China's money rates shot up to their highest since June's dramatic cash crunch. They retreated a touch on Monday.
Several markets in Asia are closed for public holidays on Monday, including New Zealand and the Philippines.
RISK IN PLAY
With risk appetite on the mend for now, demand for the safe-haven yen waned. That saw the Australian dollar gain 0.7 percent to 93.77 yen, and both the euro and dollar edged up 0.2 percent to 134.76 and 97.65 respectively.
Against the dollar, the euro was steady at $1.3802 and within striking distance of Friday's two-year high of $1.3833.
The dollar has been under broad pressure in the past few weeks on growing expectations the Federal Reserve will maintain its massive stimulus programme into next year.
The Fed's policy-setting arm, or Federal Open Market Committee, meets on Oct 29-30 and is expected to hold off on any move to scale down its $85 billion monthly bond-buying programme.
Analysts believe policymakers want to see the impact of the U.S. budget battle that took the country to the brink of a debt default and caused a partial government shutdown.
"The FOMC should be a non-event... the Washington debates cloud the growth outlook, so forget about tapering," analysts at JPMorgan wrote in a client note, adding the April 2014 meeting looked like the soonest any tapering would be announced.
In contrast to equities, commodities were more subdued with copper 0.2 percent lower at $7,174 a tonne, while U.S. crude oil slipped 0.2 percent to $97.64 a barrel.
Spot gold was a touch softer at $1,350 an ounce, but not far off a five-week high of $1,355.20 set Friday.