* MSCI Asia-Pacific index up 0.15 pct, Nikkei rises 1.25 pct
* Dollar index near 1-week high on higher US yields, sagging euro
* Crude extends losses as dollar's bounce weigh on commodities
TOKYO, Nov 21 (Reuters) - Asian stocks edged higher on Tuesday as investors took heart from further evidence of strength in the global economy, while the dollar hovered near a one-week high against its peers thanks to higher U.S. yields and a floundering euro.
Gains on Wall Street overnight also helped MSCI's broadest index of Asia-Pacific shares outside Japan tack on 0.15 percent.
South Korea's KOSPI rose 0.25 percent, Australian stocks climbed 0.15 percent and Japan's Nikkei advanced 1.25 percent.
Equity markets have enjoyed strong support this year thanks to rising corporate earnings on the back of an improving global economy.
That confidence was again on display overnight, with upbeat data in Germany helping the benchmark DAX brush off worries over the collapse of German coalition government talks.
German data showed strong industrial activity, while the Conference Board's leading economic index for the United States rose 1.2 percent in October, double the rate economists polled by Reuters had expected.
Wall Street was led up by telecom and tech shares, with the Dow edging back towards record highs scaled two weeks ago.
In currencies, the dollar index against a basket of six major currencies stood near a one-week peak of 94.104 touched overnight.
The greenback was boosted by rising bond yields, with the two-year U.S. Treasury yield touching a nine-year high of 1.755 percent overnight.
The yield has risen as investors priced in more interest rate hikes by the Federal Reserve, while the Treasury is expected to increase debt issuance with a focus on short- and intermediate-dated maturities.
"The two-year yield appears to have risen too high now, as the Fed is only likely to hike rates twice at most next year considering current trends in U.S. wages and prices," said Makoto Noji, senior strategist at SMBC Nikko Securities.
The dollar was also boosted as the euro has been weakened by political risks arising from German Chancellor Angela Merkel's failure to form a three-way coalition government, thrusting Europe's biggest economy into a political crisis.
Merkel, whose conservatives were weakened after they won an election in September with a reduced number of seats, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations.
The euro stood little changed at $1.1736 and in close reach of a six-day low of $1.1722 touched on Monday.
The dollar was steady at 112.565 yen, having bounced from a one-month low of 111.890 set overnight.
The Australian and New Zealand dollars were little changed at $0.7551 and $0.6809, respectively.
U.S. crude futures was 0.15 percent lower at $56.34, extending losses from overnight when wariness towards next week's OPEC meeting and a bounce by the dollar hurt broader commodities. (Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam)