* Nikkei climbs 1.7 pct, recoups last trading day's losses
* Buying of futures boosts sentiment in cash market
* Bounce back in dollar seen short-term positive factor
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, Jan 4 (Reuters) - Japan's Nikkei stock average climbed to a 7-½ month high in its first day of trading for the year, helped by strong global manufacturing data that has lifted equities worldwide and boosted the dollar against the yen.
Buying of Nikkei futures bolstered sentiment in the cash market, with analysts saying there were few sell orders.
"The futures market is pushing up the cash market. We saw net buy lunchtime basket orders, so it should keep sentiment high thoughout the day," said Hiroichi Nishi, general manager at Nikko Cordial Securities.
The benchmark Nikkei was up 1.7 percent or 172.15 points at 10,401.07, its highest level in eight months.
Last Thursday, the final trading day of 2010, the Nikkei fell 1.1 percent, pressured by profit-taking as the yen rose against the dollar. For the whole of 2010 it lost 3 percent.
The broader Topix index gained 1.6 percent to 913.02.
U.S. manufacturing grew for a 17th straight month, the Institute for Supply Management said on Monday. The data followed reports of faster growth in European manufacturing and bolstered investors' appetite for riskier assets.
A bounce in the dollar back to about 81.87 yen after it slipped below 81 at the year-end to its lowest in nearly two months was also seen as a positive short-term factor, traders said, although the dollar's recent softness is likely to weigh on exporters' shares in the long run.
"Market players are now focusing on the U.S. payrolls data due on Friday, which will likely have an impact on both Wall Street shares and the dollar/yen rate," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
Resource-related companies were in favour as oil prices traded near a 27-month peak hit on Monday following the upbeat European and U.S. manufacturing data and forecasts of cold weather.
Shares of Inpex Corp, Japan's top oil and gas developer, surged 4 percent to 494,500 yen.
Other commodity stocks also rallied on broad gains in commodities prices. Massive floods in Australia disrupted a big chunk of the world's metallurgical coal supply, while copper hit record highs and natural gas posted its biggest gain in more than a month.
Nonferrous metals smelter Sumitomo Metal Mining Co rose 2.5 percent to 1,454 yen and Dowa Holdings Co gained 3.4 percent to 551 yen. (Editing by Edwina Gibbs)