Asian stocks set to drift higher on U.S cues; dollar weak

HONG KONG (Reuters) - Asian stocks are set to edge higher on Monday following cautious gains on Wall Street, though the dollar is set to come under pressure as Washington's political turmoil undermines confidence in U.S. economic policy.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.42 percent on Monday helped by some gains in Korean and Japanese stocks.

U.S. stocks ended up on Friday but closed below their session highs on renewed concerns about Donald Trump's presidency, following two new media reports of possible coordination between Russia and Trump's election campaign.

"The escalation of the investigation into Russia's involvement in the recent U.S. election threatens to take resources, time, and attention away from the economic agenda, which had already begun meeting some scepticism," Marc Chandler, global head of currency strategy at Brown Brothers Harriman wrote in a note.

The dollar fell to its lowest levels in six months on Friday against a trade-weighted basket of its peers at 97.080 and was trading just a shade above that on Monday.

The dollar was trading at 111.40 after falling nearly 2 percent last week.

Signs from the government bond markets did not bode well for the greenback either. U.S. bond yields have gently drifted lower in recent days cutting the yield premium U.S. Treasuries earn against other bond markets such as German or Japanese debt.

Oil clung on to Friday's gains trading around $50.66 per barrel.

(Reporting by Saikat Chatterjee; Editing by Eric Meijer)