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By Adwitiya Srivastava

Aug 26 (Reuters) -Australian shares closed at a more than three-week high on Monday led by bank stocks, after dovish comments from U.S. Federal Reserve Chair Jerome Powell cementing expectations of an interest rate next month boosted sentiment.

The S&P/ASX 200 index .AXJO ended 0.8% higher at 8084.5, its highest close since Aug. 1.

On Friday, Fed's Powell made it evident that safeguarding the labour market was now the central bank's top priority and that it would not hesitate to switch to rate reductions in the closing weeks of the U.S. presidential election campaign.

"The ASX 200 is buoyed by optimism inspired by promises of central bank support for economies and this macro wave is evident in the sectoral performance," Michael McCarthy, chief commercial officer - Australia at trading platform Moomoo said.

Locally, investors look out for Australia's inflation data due on Wednesday, which will be crucial for the country's central bank to decide its monetary policy trajectory in the coming months.

Rate-sensitive financials .AXFJ steered gains on the benchmark for the day, rising 1.2% to mark the sub-index's best day since Aug. 16, with the 'Big Four' banks advancing between 1.3% and 2.2%.

"Banks are popular with investors as analysts downgrade potential for a recession," McCarthy added.

Miners .AXMM gained 0.6% tracking higher iron ore prices, with BHP Group BHP.AX and Fortescue FMG.AX gaining 0.4% and 1.9%, respectively. IRONORE/

Pilbara Minerals PLS.AX reported an 86% plunge in annual profit on Monday, citing lower lithium prices. Its shares, however, ended 1.3% higher.

Energy stocks .AXEJ rose 1.2%, after oil prices gained due to fears that a significant spillover from the Gaza conflict into the Middle East might impair regional oil supplies. O/R

In New Zealand, the benchmark S&P/NZX 50 index .NZ50 climbed 0.5% to end the session at 12,589.83.

Reporting by Adwitiya Srivastava in Bengaluru; Editing by Rashmi Aich

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