* MSCI Asia-Pacific index flat, Nikkei brushed 3-mth high
* Wall St hits record highs on hopes for U.S.-Canada talks
* S.Korea shares up, U.S. allows targeted relief on steel quotas
* Dollar sags, pound stands tall as 'hard Brexit' fears recede
* Oil prices extend overnight rally
By Shinichi Saoshiro
TOKYO, Aug 30 (Reuters) - Asian stocks were mostly higher on Thursday, buoyed by a firmer finish on Wall Street, which hit record highs on expectations the North American Free Trade Agreement (NAFTA) negotiations will lead to a further easing of global trade tensions.
Australian stocks rose 0.2 percent, and Japan's Nikkei touched a three-month high and was last trading up 0.15 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan , however, was little changed.
Weighing on broader gains in the region were declines in Chinese stocks with Hong Kong's Hang Seng down 0.45 percent and the Shanghai Composite Index off 0.5 percent.
South Korea's KOSPI shook off a sluggish start and was last up 0.2 percent.
Major South Korean steelmakers such as POSCO and Hyundai Steel jumped after news that President Donald Trump signed a proclamation permitting targeted relief from steel and aluminium quotas from countries including South Korea.
U.S. shares extended their rally on Wednesday, with the S&P 500 and the Nasdaq hitting record highs for a fourth straight session as technology stocks pushed indexes higher and promising NAFTA negotiations boosted investor confidence.
The leaders of the United States and Canada expressed optimism on Wednesday that NAFTA negotiations would meet a Friday deadline for a deal.
Canada rejoined the talks to modernise the 24-year-old NAFTA after Mexico and the United States announced a bilateral trade deal on Monday, which had helped global equities begin the week on the front foot.
"Recent NAFTA negotiations have helped clear some of the uncertainty the markets had been feeling, leading to hopes U.S.-China trade tensions will take a turn for the better," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
The White House has said it wants to settle NAFTA before negotiating with China.
The deadline for public comment on U.S. President Donald Trump's tariffs on another $200 billion of Chinese goods is on Sept. 5, with the new measures possibly taking effect next month.
Risk sentiment improved in other parts of the globe. The pound surged as fears a 'hard Brexit' eased after the European Union's chief exit negotiator signalled an accommodative stance towards London in ongoing talks.
Sterling rose to a 3-1/2-week high $1.3039, extending its gains after surging more than 1 percent overnight.
The dollar index against a basket of six major currencies struggled near a four-week low of 94.434 plumbed on Tuesday, weighed by the pound's rally.
The greenback has also been on the defensive this week with safe-haven demand for the currency diminishing in the wake of improving risk sentiment in broader markets.
The euro was a shade lower at $1.1701 after edging up 0.1 percent the previous day. The dollar was nearly flat at 111.64 yen after rising 0.4 percent overnight.
Investors still kept a wary eye on the Turkish lira , which retreated to a two-week trough on Wednesday after Moody's downgraded 20 Turkish banks in a further blow to a country already gripped by a financial crisis and stuck in a diplomatic row with the United States.
Other struggling emerging market currencies in focus included Argentina's peso. The peso tumbled overnight to a record low against the dollar after Argentine President Mauricio Macri asked the International Monetary Fund (IMF) for early assistance, alarming investors.
The IMF said it was studying the request from Argentina to speed up disbursement of the $50 billion loan programme.
In commodities, Brent crude futures rose 0.1 percent to $77.23 per barrel and U.S. crude futures climbed 0.15 percent to $69.62 per barrel.
Oil contracts had risen more than 1 percent on Wednesday, supported by a drawdown in U.S. crude and gasoline stocks and as U.S. sanctions reduced Iranian crude shipments.
Reporting by Shinichi Saoshiro; Editing by Eric Meijer and Sam Holmes