(Embeds Nikkei chart)
* Nikkei 225 hits highest level since Nov. 1991
* MSCI Asia ex-Japan up 0.1 pct
* European markets seen mixed after Italy ups deficit target
* Dollar hits 2018 high against yen
By Andrew Galbraith
SHANGHAI, Sept 28 (Reuters) - Japan's Nikkei raced to a 27-year high on Friday on the back of a lower yen and improved prospects for corporate earnings, while optimism over the U.S. economy's short-term outlook supported broad risk appetite and the dollar.
Japan's Nikkei stock index rose as high as 24,286.10 points, reaching its highest levels since November 1991, on renewed optimism about the global economy and hopes of a boost to exporters' earnings from a weaker yen. It was last up 1.5 percent.
Shares elsewhere in Asia also rose, with MSCI's broadest index of Asia-Pacific shares outside Japan adding 0.1 percent.
But shares in Europe are expected to waver after Italy's government targeted its budget deficit at 2.4 percent of gross domestic product for the next three years, defying Brussels.
Markets had expected Italian Economy Minister Giovanni Tria to resist a spending push by Italy's coalition government, which took power in June.
Financial spreadbetters expect London's FTSE to open 0.1 percent higher at 7,553, Frankfurt's DAX to open 0.02 percent lower at 12,433 and Paris' CAC to open 0.2 percent lower at 5,530.
Shares in China were higher ahead of a week-long national holiday. Blue chips gained 0.8 percent and the country's main Shanghai Composite index was 0.7 percent higher.
"Even though we're at historic highs across a group of global indices, the interesting thing today and yesterday is that it's translating through to dollar strength," said Nick Twidale, chief operating officer at Rakuten Securities Australia.
"Over the last couple of months, dollar strength and equities haven't gone hand in hand, but I think because of the Fed move we've seen that change in dynamic," he said.
Australian shares rose 0.7 percent, while Seoul's Kospi gave up ground, falling 0.7 percent after hitting three-month highs on Thursday.
S&P E-mini futures crept higher on Friday to 2,921.25 after gains on Wall Street overnight.
After the Fed raised rates on Wednesday, the third time this year, Fed Chairman Jerome Powell said on Thursday that the United States does not face a large chance of a recession in the next two years and the Federal Reserve plans to keep gradually raising interest rates.
But Citi analysts cautioned in a note that not all data was reassuring.
"The Citi US Economic Surprise Index has been pushed into negative territory by disappointing housing data in the United States," they wrote.
"The latest data confirms that the housing market continues to be less than ideal. Pending home sales, a leading indicator, declined to the lowest level in seven months."
Pending home sales fell 1.8 percent month-on-month versus consensus expectations for a 0.5 percent drop, they said.
The bullish outlook for the U.S. economy continued to lift the dollar, which was up 0.1 percent against the yen at 113.49 , and earlier touched a new 2018 high of 113.63.
"There's a couple of reasons that the dollar's going to remain popular," said Twidale. "One's interest rate differentials, and the other is safe haven status while we've got these global trade concerns. It's nothing new, but I think we could see an acceleration."
The euro rose 0.1 percent to 1.1650 after dropping more than 0.8 percent on Thursday on uncertainty over Italy's budget deficit.
The dollar index, which tracks the greenback against a basket of six major rivals, was up 0.06 percent at 94.947.
U.S. Treasury yields ticked lower. The yield on benchmark 10-year Treasury notes was at 3.0463 percent on Friday, compared with its U.S. close of 3.055 percent on Thursday.
The two-year yield, closely tied to expectations of higher Fed fund rates, touched 2.8310 percent compared with a U.S. close of 2.835 percent.
U.S. crude was 0.3 percent higher at $72.32 a barrel. Brent crude was up 0.1 percent at $81.79 per barrel.
Gold was slightly higher after tumbling 1 percent on Thursday on strength in the U.S. dollar, which made bullion more expensive for buyers using other currencies.
Spot gold was up 0.14 percent at $1,184.06 per ounce.
Reporting by Andrew Galbraith Editing by Eric Meijer