Asian shares hovered close to eight-month highs on Wednesday, pausing for breath after rallying on optimism that the global economy is through the worst, while the dollar struggled near its latest set of lows for the year.

Oil succumbed to profit-taking after a six-day rally which took it to seven-month highs, with crude futures dipping toward $68 a barrel after data showed U.S. crude inventories fell less than expected last week.

In Japan, the benchmark Nikkei stock average rose 0.4 percent, boosted by trading house Mitsubishi Corp and resource shares on sustained commodities demand and high metals prices.

The MSCI index of Asian shares excluding Japan, which is now at levels not seen since the month Lehman Brothers collapsed, rose 0.7 percent to just below an eight-month peak set on Tuesday.

The index has risen more than 55 percent since early March as investor confidence has grown that the global downturn has slowed, with latest evidence coming from a surprise surge in U.S. pending homes sales.

There's been enough improvement in the global economy to say that we've put the worst-case scenario behind us, said Yutaka Miura, senior technical analyst at Mizuho Securities.

The Dow Jones industrial average closed up 0.2 percent at 8,740.63 on Tuesday, the Standard & Poor's 500 Index rose 0.2 percent and the Nasdaq Composite Index gained 0.4 percent.

However Asian markets were not powering away to the same degree they have done in recent sessions, with analysts still cautious about the strength of the economic foundations for the three-month long rally in shares and higher yielding currencies.

We need still more proof that things are really improving, Miura said.

A Bank of Japan policy board member said the central bank may need to take swift steps to support the world's second-largest economy depending on changes in the economic situation.

But Hidetoshi Kamezaki also said Japan, whose economy shrank at a record 4.0 percent in the first quarter, could recover slowly by early next year.

In Australia, gross domestic product data showed the economy grew 0.4 percent in the January-March quarter, beating forecasts and confounding fears of it falling into recession..

The data helped Australian shares to their highest in nearly seven months, with the index gaining 0.7 percent and miners rising on hopes of fresh demand for metals.

The Australian dollar also rose after the numbers, gaining 0.3 percent on the day to $0.8230 and trading at its highest since late September.

The dollar has been the prime loser in the risk-taking rally that has stoked multi-month peaks in major currencies as investors gained the confidence to branch out into markets other than safe-haven dollar-based ones.

The greenback hit its weakest level this year against a basket of six major currencies on Tuesday and was hovering just above that level on Wednesday.

The euro eased slightly to $1.4303 after hitting a 2009 high of $1.4332 on electronic trading platform EBS in the previous session and the dollar held its own at 95.74 yen.

Gold steadied at over $983 per ounce, with the weaker dollar supporting demand for bullion as a hedge against deterioration of dollar-denominated portfolios. It hit a three-month high above $988 on Monday.

U.S. crude futures slipped toward $68 a barrel after data showed U.S. crude inventories fell less than expected last week. Futures hit their highest since early November on Tuesday, above $69 a barrel.

(Editing by Kazunori Takada)