* U.S. crude futures down from two-year highs after Saudi crackdown
* Nikkei reverses early losses, hits near 26-year highs
* Uncertainty over U.S. tax reform progress weigh on dollar
TOKYO, Nov 7 (Reuters) - Asian shares rallied to their highest in a decade on Tuesday, while oil prices gave up some of their gains having previously surged to a more than two-year peak on an anti-corruption purge by Saudi Arabia's crown prince.
MSCI's broadest index of Asia-Pacific shares outside Japan extended early gains, rising 0.8 percent to its loftiest peak since November 2007. The index got a bump higher after all three major U.S. equity indexes closed at record highs overnight.
Japan's Nikkei reversed early losses and jumped 1.1 percent to nearly 26-year highs.
"Foreign investors who were underweight on Japanese stocks in the summer are raising their investment stances to neutral and even overweight," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Australia's S&P/ASX 200 index jumped 0.8 percent to its highest since February 2008, bolstered by strong commodities prices.
Australia's central bank held rates at record lows for a 14th straight policy meeting on Tuesday as expected, and signalled it would stay sidelined for months to come amid stubbornly low inflation.
U.S. crude shed 2 cents to $57.33 after breaking above $56 a barrel for the first time in more than two years overnight. Brent crude futures were down 10 cents at $64.17.
Mohammed bin Salman's clampdown on graft led to arrests of royalty, ministers and investors, including prominent billionaire investor Alwaleed bin Talal.
Analysts for now do not see Saudi Arabia, the world's largest oil exporter, changing its policy of supporting crude prices, but the crackdown has spurred concerns of Middle Eastern money pulling out of global financial markets
"For now, concerns about the Saudi news do not appear to be weighing on U.S. shares, but if they do become a problem in the future, it could eventually have an impact on Japanese shares," Yutaka Miura, a senior technical analyst at Mizuho Securities in Tokyo.
The dollar index, which tracks the greenback against a basket of six major currencies, was nearly flat on the day at 94.735.
The dollar added 0.2 percent against the yen to 113.89 but remained well below its eight-month high of 114.737 marked in the previous session.
The euro was steady on the day at $1.1613.
The lack of clarity on the progress of U.S. tax reform as well as leadership at the U.S. central bank clouded the dollar's outlook.
Tax negotiators in the U.S. House of Representatives will seek to overcome their differences this week and work on a plan, aiming for their self-imposed deadline of passage this month.
The Federal Reserve confirmed on Monday that influential monetary policymaker William Dudley plans to retire by mid-2018, leaving the leadership of the U.S. central bank unusually open.
Lower U.S. yields also weighed on the dollar, with the benchmark 10-year yield at 2.325 percent in Asian trading compared to 2.320 percent, its U.S. close on Monday, when it plumbed its lowest levels in two weeks. It was at a seven-month high of 2.47 percent as recently as late October.
The gap between U.S. short-dated and long-dated Treasury yields on Monday contracted to its tightest levels in a decade amid sluggish domestic inflation.
Spot gold was down 0.2 percent at $1,279.56 per ounce after gaining nearly one percent in the previous session, easing in line with firmer Asian equities markets.
(Reporting by Lisa Twaronite; Editing by Sam Holmes)