* MSCI Asia ex-Japan falls, Nikkei drops 0.5 pct
* Euro falls to 1-month low vs dollar
* Dollar index touches 2-month highs on safety bids
* Gold recovers from plunge, holds above key technicals
* European shares likely decline
TOKYO, Nov 5 (Reuters) - Asian shares fell on Monday and the dollar firmed as investors shied away from risk ahead of the closely fought U.S. presidential election, the result of which could define a clear direction for broader markets.
U.S. stock futures suggested a firm Wall Street start, with a 0.2 percent rise, but European shares were seen falling, with financial spreadbetters expecting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open down as much as 0.5 percent.
The political uncertainty in the world's largest economy made investors wary of holdings riskier assets, and their safe-haven bids buoyed the U.S. dollar to two-month highs against a basket of major currencies.
U.S. President Barack Obama and Republican challenger Mitt Romney were neck-and-neck in opinion polls in the final 48 hours before Tuesday's vote.
Obama's re-election is perceived as negative for equities, while markets see Romney as stock-friendly, analysts have said.
After the U.S. election, Congress must deal with a ``fiscal cliff'', up to $600 billion in expiring tax cuts and spending reductions that are set to kick in next year, which threatens the U.S. economy.
A key concern over the U.S. election was the possibility of a narrow Obama victory combined with a convincing Republican win in Congress, said CMC markets analyst Ric Spooner.
That ``would make negotiations over fixing the fiscal cliff (difficult).''
The MSCI index of Asia-Pacific shares outside Japan inched down 0.2 percent, while Japan's Nikkei average fell 0.5 percent.
Australian shares bucked the trend with a 0.3 percent rise after stronger-than-expected domestic retail sales figures helped boost sentiment.
Hong Kong's Hang Seng index was down 0.5 percent but still near a 15-month high reached on Friday and South Korean shares dropped 0.6 percent.
``Rather than any particular downside factor, the main board appears to be largely reflecting caution shown in Wall Street during the last trading before U.S. elections,'' Kim Young-joon, analyst at SK Securities, said of Seoul shares.
Later this week, the Chinese congress starting Nov. 8 will usher in a generational leadership change, while the Reserve Bank of Australia holds a policy meeting on Tuesday amid mixed market views over whether last month's rate cut will be repeated.
FUNDS PRESSURE GOLD
The dollar traded at 80.42 yen, near a more-than-six-month high of 80.68 yen scaled on Friday when strong U.S. payrolls and demand for factory goods lifted the U.S. currency.
Spot gold recovered from Friday's 2 percent plunge to a two-month low of $1,673.94 an ounce and ticked up 0.2 percent to $1,679.20, holding above a key technical level of its 200-day moving average around $1,660.
``Strong U.S. jobs data was used by hedge funds to liquidate gold ahead of their book closing this month and next, as a solid U.S. economy lessens the need for quantitative easing, which had driven gold prices higher,'' said Koichiro Kamei, managing director at financial research firm Market Strategy Institute.
Funds were also cautious, as Romney's win is perceived to be negative for gold given his criticism of quantitative easing, Kamei said. He said it was crucial whether seasonal demand from India and China could absorb funds' selling to maintain the support level.
Hedge funds and other big speculators shed U.S. commodities by $8 billion last week, with gold seeing the largest outflow of net long money for a second week running.
U.S. crude futures inched up 0.3 percent to $85.15 a barrel and Brent also rose 0.3 percent to $105.95.
The euro traded at $1.2828 after hitting a one-month low of $1.2816 early on Monday.
The euro was weighed down by a survey showing euro zone October manufacturing shrank for the 15th straight month, as well as renewed uncertainty over Greece, which is set to vote on another package this week that could pave the way for the European Union to approve the next bailout tranche.
China's recovery remained fragile, as a private survey of China's services slipped in October, countering an official report which showed a rebound in the sector.
The global downturn caught up with Southeast Asia's largest economy, Indonesia, which grew 6.2 percent in the third quarter from a year earlier, down from a 6.4 percent pace in the second quarter.
Another Asian giant, India, said its services sector grew at the slowest pace in six months during October as weakness in the United States and Europe hurt orders and forced firms to hire fewer workers.
Asian credit markets weakened with investor risk aversion, pushing the spread on the iTraxx Asia ex-Japan investment-grade index wider by 4 basis points.