* World stocks extend gains to 3-week high
* Market await Bernanke testimony Wednesday
* Dollar eases; Swiss central bank buys euros for francs
* Oil holds near 6-week highs; gold firms
By Tamawa Desai
LONDON, Feb 23 (Reuters) - World stocks hit three-week highs
while the dollar eased on Tuesday as markets anticipated a
dovish tone from U.S. Federal Reserve Chairman Ben Bernanke
after the central bank raised its discount rate last week.
European shares rose 0.5 percent in early trade <>
after most Asian markets apart from Tokyo ended higher. U.S.
stock futures <SPc1> were also up after a soft session in Wall
Street overnight.
All eyes are on Bernanke's testimony to Congress on the
Fed's exit strategies, especially after the central bank last
week raised the rate it charges banks for emergency loans.
San Francisco Fed President Janet Yellen was the latest
policymaker to stress the move was not a sign of rapid monetary
tightening.
The U.S. economy still needs extraordinarily low interest
rates, as inflation is "undesirably low" and growth will likely
be sluggish for several years, she said on Tuesday.
[]
MSCI's world equity index <.MIWD00000PUS> was up 0.2 percent
on the day after climbing to its highest since early February.
"Bernanke and his fellow policymakers have made it clear
that this is not the start of moving the base rates up," said
Koen De Leus, economist at KBC Securities.
"We have had a rebound in GDP (gross domestic product) but
that was all due to inventories and government stimuli and if
you take these out you still have an economy that is
contracting."
The euro pared gains after German Ifo institute's business
climate index fell to 95.2 in February, lower than forecasts for
96.1. []. But the euro was still up 0.5 percent on
the day at $1.3665 <EUR=> as the dollar eased against a basket
of currencies <.DXY> ahead of Bernanke's testimony.
Analysts said while investors remained mindful of ongoing
fiscal problems in Greece, many were taking a breather after
dumping the euro in the past weeks.
"There's been a degree of risk-aversion fatigue," said
Geoffrey Yu, currency strategist at UBS in London.
"People are buying risk, at the same time (risk) selling
flows have been drying up."
The euro gained against the Swiss franc after the Swiss
central bank was seen buying euros on trading platform EBC
during Asian hours.
The euro was up 0.2 percent at 1.4666 francs <EURCHF=> after
rising as high as 1.4687 francs.
Euro zone government bond yields drifted higher as the
market awaited a Greek bond issue and as gains in European
equities undermined demand for lower risk sovereign debt.
U.S. crude oil was steady near six-week highs above $80
<CLc1> as forecasts for an increase in U.S. crude and gasoline
stockpiles offset concerns that a strike at Total's French
refineries would trigger fuel shortages.
Gold prices <XAU=> firmed as the dollar softened.
(Additional reporting by Harprett Bhal and Naomi Tajitsu;
editing by Stephen Nisbet
