By Alun John

HONG KONG (Reuters) - Asian shares edged higher on Tuesday, cruising in the slipstream of another record-setting day on Wall Street, while the safe-haven yen lost ground as traders stayed in riskier assets.

A variety of asset classes from oil to Japan's Nikkei Stock Average are now trading at around one-month highs, having walked back losses from late November when the Omicron variant of COVID-19 first emerged and sent investors scurrying for safe havens.

As the worst fears of the impact of the new variant have subsided, investors have been returning to risk assets.

On Tuesday, Japan's Nikkei gained 1.3%, and touched its highest since Nov. 26, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.66%. Recent losses by index heavyweights like Alibaba (NYSE:BABA) and Tencent mean the broad benchmark is still well off its late November levels.

"The risk-on sentiment continues," said Edison Pun, senior market analyst at Saxo Markets in Hong Kong, who said neither Omicron nor China's coronavirus situation was troubling investors.

China reported 209 new confirmed coronavirus cases for Dec. 27, up from 200 a day earlier, mostly in the northwestern province of Shaanxi, where Xian, the provincial capital, is in lockdown.

Elsewhere, authorities in Britain and France have held off from imposing tough restrictions on movement, betting that high vaccination rates will stop hospitals from being overwhelmed even as cases surge.

Overnight the S&P 500 index rose 1.38% to end at a record on Monday as strong U.S. retail sales underscored economic strength, while the Dow Jones Industrial Average climbed 0.98% and the Nasdaq Composite added 1.39%. [.N]

The risk-on mood could be seen across asset classes.

Oil prices cautiously extended gains on Tuesday, after surging more than 2% to their highest in a month a day before. [O/R]

Brent crude rose 0.4% to $78.89 a barrel and U.S. crude gained 0.4% to $75.90 a barrel.

Meanwhile the yen slipped to 114.87 per dollar, having touched a one-month low earlier in the session.

The dollar, also a safe haven, in turn lost ground on other currencies, for example the pound, which gained 0.5% on Monday and last traded near a five-week high of $1.3445. (FRX)

However, the dollar was supported by a surge in short term U.S. Treasury yields. The two-year yield, rose as high as 0.758% in early Asian trading, its highest since March 2020, following weak demand in an auction for new two-year notes the day before.

The yield on benchmark 10-year Treasury notes was steady at 1.4739%. [US/]

Spot gold was steady at $1,810 an ounce. [GOL/]