* Minutes suggest Fed will keep easy policy for foreseeable future
* Upbeat China PMI adds to share gains, lifts Aussie
* Improved risk appetite weighs on safe-haven yen
TOKYO, May 22 (Reuters) - Asian shares and the Australian dollar rose on Thursday after an upbeat reading on China's factory sector blunted some of the more pessimistic views on the world's second-biggest economy, supporting risk appetite already burnished by a strong session on Wall Street.
Equities were on the front foot after minutes of the U.S. Federal Reserve's last meeting reassured investors that policy makers will continue to support the economy, depressing the safe-haven yen.
That set up the riskier asset markets for a decent uptick when a private survey showed China's factory sector turned in its best performance in five months in May.
The gains were capped somewhat as overall manufacturing growth still contracted slightly in a suggestion that the outlook remains murky. Still, the positive headline readings assuaged markets braced for a weak outcome.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent while Tokyo's Nikkei climbed 1.2 percent.
Chinese shares rose 0.4 percent.
The Australian dollar, which is sensitive to developments in the economy of its major trading partner China, rose about a quarter of a cent to $0.9254.
Medium and long-dated U.S. Treasury yields had climbed overnight, reflecting discussions by the Fed for the eventual tightening of policy though the start of that cycle was some way off.
The closely-watched minutes of the Fed's April Open Market Committee meeting released on Wednesday showed that policy makers had begun to lay the groundwork for an eventual exit from their easy stance, but that the discussions were "prudent planning" and not a sign rate hikes would come any time soon.
"There was a lot of rejoicing at the Fed minutes; a one line synopsis of the release would read - the Fed continues to champion accommodation for the foreseeable future," Evan Lucas, market strategist at IG in Melbourne, said in a note to clients.
For now, the return of risk appetite weighed on the yen and underpinned the dollar somewhat.
The greenback rose 0.1 percent to 101.46 yen, extending its rebound from a 3-1/2 month low of 100.805 yen touched on Wednesday when Bank of Japan Governor Haruhiko Kuroda reiterated his optimistic view on the Japanese economy and provided no hints of further monetary easing in the near term.
The dollar also advanced against the euro, which has been hurt by growing expectations the European Central Bank will ease monetary policy in June and potentially destabilising European Parliament elections later this week.
The euro stood at $1.3679 after hitting a three-month trough of $1.3634 on Wednesday. Traders are now looking at the euro zone purchasing managers surveys due later in the day for some immediate catalysts.
The single currency was also on the back foot against the British pound. It traded at 80.97 pence after slipping to a 17-month low of 80.85 pence.
In commodities, the improved appetite for risk reduced gold's safe haven appeal.
Spot gold stood little changed at $1,291.90 after shedding 0.2 percent on Wednesday.
U.S. oil traded at $103.94 a barrel, near a one-month high of $104.29 a barrel hit on Wednesday after the U.S. government reported a large draw in commercial crude stocks.
(Editing by Shri Navaratnam)