* Global stocks edge higher; hover near 11-month peak
* Dollar trades near 1-year low; kiwi jumps
* Crude oil falls towards $71, but dollar limits decline
By Atul Prakash
LONDON, Sept 23 (Reuters) - World stocks drifted higher on
Wednesday to hover near a recent 11-month high and the dollar
stayed around a one-year low, with investors trading cautiously
ahead of a Federal Reserve policy decision later in the day.
A weaker U.S. currency helped gold to extend gains and move
closer to last week's 11-month high and limited crude oil's
decline, which fell towards $71 a barrel on an industry report
showing a surprise build in U.S. crude oil stockpiles.
The MSCI world equity index <.MIWD00000PUS> was up 0.2
percent, while the FTSEurofirst <> index of top European
shares rose 0.3 percent on the back of stronger financial
stocks. The MSCI index has risen 28 percent so far this year.
But investors remained cautious before a decision by the
Fed, which is widely expected to hold overnight lending rates at
close to zero percent and repeat its intention to keep rates
exceptionally low for an extended period in a statement at
around 1815 GMT, after the U.S. central bank's two-day policy
meeting draws to a close. []
"The markets are treading water, with neither the bulls or
the bears taking the lead," said John Murphy, analyst at ODL
Securities.
"It feels as if it is easier for investors to adopt a
wait-and-watch approach until there is a definite move either to
the upside or the downside."
The Fed is also expected to take note of an improving
economy, while cautioning that high unemployment puts the
recovery at risk. It is also expected to keep its massive
financial support for the economy in place.
European stocks got support from surveys showing euro zone
services business grew for the first time in 16 months in
September and factory output rose for the second month running,
suggesting the bloc has pulled out of recession.[].
Sentiment also improved after U.S. Treasury Secretary
Timothy Geithner said on Tuesday that the world's biggest
economy was at the "beginnings" of a recovery, and the key was
to ensure that the recovery was self-sustaining.
A U.S. plan to build a more balanced global economy won
support from leaders of some of the largest Western powers on
Tuesday, who warned against returning to business as usual once
recovery takes hold. []
DOLLAR NEAR 1-YR LOWS
The dollar hovered near a one-year low against a currency
basket as speculators sold the low-yielding greenback but some
in the market expected a pullback in the currency market before
the Fed's policy decision.
The New Zealand dollar surged to its highest in 13 months
against the U.S. currency after the economy unexpectedly pulled
out of recession in the second quarter, fuelling expectations
the central bank might have to start raising rates sooner than
previously thought.
The jump in the kiwi prompted investors to shift more money
into other higher-yielding currencies such as the Australian
dollar from the U.S. currency, and helped trigger further
speculative dollar selling against other currencies such as the
euro and the yen.
"Overall the FOMC and the G20 are unlikely to disrupt the
recent positive tone in asset markets and that's likely to see
the trends in currency markets resume," said Ian Stannard,
currency strategist at BNP Paribas in London.
"I will be looking at the currency pullback I expect today
to be very much providing a buying opportunity for the
pro-cyclical and commodity currencies," he said.
Most euro zone government bond yields edged higher ahead of
a 7-billion euro issue of German five-year debt. The sale of a
new five-year Bobl will attract market attention and is likely
to weigh on prices in concession-building prior to the sale.
European credit default swaps opened tighter, with the
investment-grade index breaking through the 80 basis-point mark
and demand for new issues showing little sign of abating.
(Additional reporting by Emelia Sithole-Matarise; Editing by
Victoria Main)
