By Hilary Russ
NEW YORK (Reuters) - The dollar hit its highest level in a week on Wednesday and stocks rose as investors waited to see if minutes from the Federal Reserve's last policy meeting would herald more rises in interest rates and global bond yields.
Oil prices inched lower, pressured by the dollar's recovery and an anticipated rise in U.S. crude production, while the MSCI's world index of stocks gained 0.47 percent.
The dollar index, which measures the greenback against a basket of peers, rose 0.15 percent.
The index has bounced almost 1 percent so far this week, after slumping 1.5 percent the previous week to its lowest level in three years.
Investor attention was focused on minutes of the Fed's policy meeting in late January, due at 1900 GMT. The latest readings of U.S. wages and inflation came in higher than expected, with some blaming the data for a violent selloff in stocks earlier in February.
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"Markets are particularly sensitive to inflation, and we think the odds that the minutes reinforce the narrative of firming inflation are high," said Elsa Lignos, RBC's global head of FX strategy.
"We think there is a high probability that the Fed moves the dots to four hikes in 2018 (from three) near-term, and that the minutes could be another step in that direction."
The U.S. currency has been weighed down this year by concerns that Washington might pursue a weak-dollar strategy, and by the perceived erosion of its yield advantage as other countries start to scale back their easy-money strategies.
Confidence in the dollar has also been shaken by mounting worries over the U.S. budget deficit.
But the greenback finally appeared to be benefiting from rising U.S. bond yields, especially as the Treasury Department issues more debt in anticipation of a higher deficit from last year's tax overhaul and plans to increase federal spending.
As markets braced for the next wave of this week's $258 billion deluge of new debt, two-year and 10-year Treasury yields eased a touch, with the former retreating from nine-year highs of 2.282 percent hit on Tuesday.
The euro edged down 0.15 percent to $1.2318 as the dollar rose.
In Britain, an unexpected jump in the jobless rate weighed on the pound, sending sterling down 0.22 percent to $1.3964.
STOCKS RECOVER
The Dow Jones Industrial Average rose 105.73 points, or 0.42 percent, to 25,070.48, the S&P 500 gained 15.92 points, or 0.59 percent, to 2,732.18 and the Nasdaq Composite added 62.17 points, or 0.86 percent, to 7,296.48.
Wall Street had fallen during the previous session, but Asian-Pacific shares outside of Japan shrugged off that weakness to close 1.06 percent higher, while Japan's Nikkei rose 0.21 percent.
The pan-European FTSEurofirst 300 index rose 0.07 percent and the STOXX 600 index inched up 0.02 percent.
Germany's DAX lost 0.3 percent, however, still spooked by the recent rises in bond yields.
European analysts noted that more than half of MSCI Europe companies have either met or beaten analysts' earnings expectations, according to Thomson Reuters data.
"The underlying earnings season has been quietly delivering the goods," UBS equity strategists told clients, adding that they remained bullish on European equities for 2018.
U.S. crude fell 0.36 percent to $61.57 per barrel and Brent was last at $65.18, down 0.11 percent.
(Reporting by Ritvik Carvalho and Amanda Cooper in London; Editing by Meredith Mazzilli)