* Nikkei marks 21-year highs ahead of Japan holiday
* Wall Street logs modest gains after Fed holds steady
* Crude oil futures steady, not far from 2-year highs
TOKYO, Nov 2 (Reuters) - Asian shares advanced on Thursday after the U.S. Federal Reserve expressed optimism about the economy, virtually cementing the case for a year-end rate hike as investors awaited the formal nomination of the next head of the central bank.
The White House plans to nominate current Fed Governor Jerome Powell as the next chair when Janet Yellen's term expires in February, a source familiar with the matter said on Wednesday. Powell's nomination is expected later on Thursday and would need to be confirmed by the Senate.
Rising expectations that President Donald Trump will tap Powell, who is seen as more dovish on interest rates, have pressured U.S. Treasury yields and the dollar this week.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.1 percent in early trading, moving back toward a 10-year peak scaled in the previous session.
Japan's Nikkei stock index was up 0.2 percent, probing fresh 21-year highs and on track to gain 2.3 percent in a holiday-shortened week. Japanese markets will be closed for a national holiday on Friday.
Foreign investors, who largely shunned Japanese stocks earlier this year, have turned net buyers over the past six weeks, according to the Tokyo Stock Exchange.
On Wednesday, Wall Street posted modest gains after the Fed held policy steady as expected and underscored solid U.S. economic growth as well as a strengthening labour market while downplaying the impact of recent hurricanes.
Investors took that as a sign the U.S. central bank is on track to resume hiking interest rates next month, with federal fund futures putting the odds of a December rate hike at about 98 percent, according to CME Group's FedWatch program.
The Fed has raised interest rates twice this year, and forecasts one more hike by the end of the year as part of its tightening cycle that began in late 2015.
In addition to the Fed's encouraging assessment, ADP National Employment Report showed that private employers hired 235,000 workers in October, the most in seven months.
The upbeat figures "speak to a broad mosaic of good economic data coming out of the U.S., although slightly muddied by the hurricanes," said Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana.
On Friday, the Labor Department's nonfarm payrolls report is expected to show growth of 303,000 jobs in October, compared to a drop of 40,000 the month before. Total non-farm employment is expected to have increased by 312,000, according to economists polled by Reuters.
U.S. Treasury yields fell further on Wednesday and the yield curve was its flattest since 2007 after the Treasury Department said it would keep auction sizes steady in the coming months, despite the Fed's plan to reduce its bond holdings.
Benchmark 10-year note yields were at 2.372 percent in Asian trading, compared to their U.S. close of 2.376 percent on Wednesday, when they dipped as low as 2.349 percent.
The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.1 percent to 94.712
The dollar pulled back slightly against the yen to 114.15 , below its three-month high of 114.45 yen touched last Friday, while the euro was 0.1 percent higher at $1.1630.
Crude oil futures were steady, with Brent crude flat on the day at $60.49 per barrel and U.S. crude down 6 cents at $54.24.
While oil settled lower on Wednesday after weekly U.S. government inventory data showed the latest crude stock draw was not as big as an industry trade group had reported, both Brent and U.S. crude futures remain near their highest levels since July 2015 as lower global supply pushed markets higher.
(Reporting by Lisa Twaronite; Editing by Shri Navaratnam)