* MSCI Asia Pacific ex-Japan up 0.2 pct, Nikkei opens down 0.26 pct

* Euro down 0.1 pct, dollar index up 0.1 pct

* Firmer dollar weighs on gold

By Chikako Mogi

TOKYO, Nov 8 (Reuters) - Asian shares rose on Tuesday, but gains were capped by concerns that surging bond yields could stifle debt-ridden Italy's fund raising ability and throw the euro zone deeper into financial turmoil, while Greece struggled to pick a new leader.

MSCI's broadest index of Asia Pacific shares outside Japan , was up 0.2 percent while Japan's Nikkei stock average opened down 0.26 percent.

The euro fell 0.1 percent to $1.3758 against the dollar as investors feared that political uncertainty in Italy and Greece could derail Europe's efforts to implement a bailout scheme to prevent a Greek default.

The single currency fell as low as $1.3679 on Monday, but stayed within the $1.3608 and $1.3866 range of the past week.

Prime Minister Silvio Berlusconi defied intense pressure to resign on Monday, pushing yields on Italy's 10-year bonds to 6.67 percent , their highest level since 1997.

Italy, the third largest economy in the euro zone, has the biggest government bond market. Borrowing costs hitting the 7 percent level were widely seen as unsustainable for its debt.

"The threat to the FX market, obviously, is that a country with nominal GDP growth of just 1.8 percent at the last count and debt totalling 120 percent GDP, cannot sustain 6.5 percent yields for long," said Kit Juckes, strategist at Societe Generale.

Asian credit markets remained sluggish, keeping a widening bias on the spreads on the iTraxx Asia ex-Japan investment grade index , a gauge of investor appetite for risk. The spread was slightly wider on Tuesday.

The dollar index against six key currencies inched up 0.1 percent, weighing on gold , which rose over 2 percent on Monday when sentiment was boosted by technical buying, expectations of widespread monetary easing and Italy's woes.

European policymakers were boosting pressure to put Italy under full surveillance, with Jean-Claude Juncker, the chairman of Eurogroup finance ministers, saying the European Central Bank would take part in monitoring economic reforms along with the European Commission and the International Monetary Fund.

While attention has shifted to Italy after Greece stayed on track to reduce its debt, bargaining over the choice of a new Greek prime minister maintained the risk of a political vacuum.

Market jitters lingered over a lack of funding to bolster the bailout fund. No pledges have been received for new money.

This has prompted euro zone finance ministers to speed up legal and technical preparations for leveraging the bailout fund to around 1 trillion euros by the end of November to deploy it in December to shield vulnerable but solvent economies such as Italy's and Spain's from a possible Greek default.

France announced new austerity measures designed to preserve its wobbly AAA credit rating, without which the euro zone might no longer be able to bail out its weakest members.