GLOBAL MARKETS-Dollar gains on Bernanke comments, bonds slip

                                

                                
 * Dollar rises on Bernanke comments on tighter policy
                                
 * Bonds tumble after Bernanke talks up exit strategy
                                
 * Oil rises as demand outlook outweighs stronger dollar
 (Updates with close of U.S. markets)
                                
 By Herbert Lash
                                
 NEW YORK, Oct 9 (Reuters) - The U.S. dollar rose from a
14-month low on Friday after Federal Reserve Chairman Ben
Bernanke said the U.S. central bank will be ready to tighten
monetary policy, sparking a sell-off in bond markets.
                                
 Gold, which nearly always moves inversely to the dollar,
eased after hitting record highs for three straight sessions as
Bernanke's comments late Thursday lifted the dollar broadly.
                                
 The U.S. Dollar Index <.DXY>, measuring the greenback
against a basket of six major currencies, rose 0.6 percent at
76.423.
                                
 A stronger dollar initially pushed oil down toward $71 a
barrel, but a positive demand outlook from the International
Energy Agency led crude prices to settle with a slight gain.
For details, see: [ID:nN0978818]
                                
 U.S. stocks rallied, with the broad S&P 500 Index and
Nasdaq index extending winning streaks to five days, as
investors anticipated positive news from key earnings reports
next week.
                                
 Bullish broker comments boosted tech shares.
[ID:nN0982040]
                                
 The three major U.S. equity indexes posted their best
weekly gain since mid-July, and the Dow Jones industrial
average reached a closing high for 2009.
                                
 Bernanke's comments raised fears among investors that the
Fed was closer to hiking interest rates than previously
thought, sparking the biggest bond sell-off in more than a
month.
                                
 The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
1-4/32 in price to yield 3.39 percent.
                                
 A lackluster U.S. 30-year bond auction on Thursday reminded
both investors and officials that given a weak currency,
foreign appetite for U.S. assets has its limits.
                                
 "People are anticipating that now the Fed may be more
inclined to raise rates earlier than anticipated," said Kevin
Chau, currency strategist at IdeaGlobal in New York.
                                
 "I think they will continue to jawbone by saying they're
vigilant, but I think they will still hold off (raising rates)
until the second half of 2010."
                                
 The Dow <.DJI> closed up 78.07 points, or 0.80 percent, at
9,864.94. The Standard & Poor's 500 Index <.SPX> was up 6.01
points, or 0.56 percent, at 1,071.49. The Nasdaq Composite
Index <.IXIC> was up 15.35 points, or 0.72 percent, at
2,139.28.
                                
 "The mood is ... reasonably optimistic (on earnings), which
is part of the reason why we have seen 3-4 percent gains so far
this week," said Fred Dickson, market strategist at D.A.
Davidson & Co in Lake Oswego, Oregon.
                                
 The IEA increased its global oil demand growth estimate for
2010, as well as for the rest of 2009. [ID:nL9515065]
                                
 U.S. crude <CLc1> settled up 8 cents at $71.77 a barrel.
London Brent crude <LCOc1> gained 23 cents to settle at $70.00
a barrel.
                                
 "The oil market today is sort of trying to balance the
competing influences -- the dollar and the stock market," said
Brad Samples, an analyst at Summit Energy in Louisville,
Kentucky.
                                
 Bernanke's comments also weighed in Europe, helping push
equities lower and the price of euro zone government debt.
                                
"Bernanke put the brakes on the market by supporting the
dollar," said Alex Heath, head of base metals at RBC Capital
Markets.
                                
 The pan-European FTSEurofirst 300 <.FTEU3> index of top
shares closed down 0.3 percent at 998.17.
                                
 Ten-year euro zone government bond prices fell nearly a
full point. [ID:nL9674093]
                                
 Even though the Fed's vast support for the U.S. economy
will likely be needed for some time, the central bank will have
to remove those measures as the economy heals, to ward off any
threat of inflation. [ID:nN08545619]
                                
 The euro <EUR=> was down 0.53 percent at $1.4711. Against
the yen, the dollar <JPY=> was up 1.59 percent at 89.82.
                                
 U.S. gold futures slipped on the dollar bounce.
[ID:nN0980810]
                                
 December gold futures <GCZ9> settled down $7.70 at
$1,048.60 an ounce in New York.
                                
 Asian shares hit a new 14-month high on investor optimism
over the global economy.
                                
 Japan's benchmark Nikkei average <.N225> rose 1.9 percent,
and the MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> edged up 0.3 percent to extend the week's gains
of about 4.7 percent to hit a 14-month high of 402.16.
 (To read Reuters Global Investing blog, click on
http://blogs.reuters.com/globalinvesting. For the MacroScope
blog, click on http://blogs.reuters.com/macroscope. For Hedge
Fund blog, click on http://blogs.reuters.com/hedgehub)
 (Reporting by Ryan Vlastelica, Burton Frierson, Wanfeng Zhou
and Rebekah Kebede in New York and Joanne Frearson and George
Matlock in London; Writing by Herbert Lash; Editing by Padraic
Cassidy)