Global shares, commodities edge up on Fed stimulus view

NEW YORK (Reuters) - Global shares edged higher and commodities firmed on Wednesday on expectations the U.S. Federal Reserve will announce a fresh round of bond buying to stimulate a fragile economic recovery.

The U.S. dollar fell against the euro and hit multi-month lows against higher-yielding currencies such as the Australian and New Zealand dollars as the prospect of more Fed monetary stimulus eroded the appeal of dollar-denominated assets.

The Fed looks certain both to extend its purchases of mortgage-backed debt and replace another expiring stimulus program with a new bout of money creation. Worries about the economy have mounted because of political wrangling in Washington over the government budget.

The central bank will announce its decision around 12:30 p.m. at the end of a two-day meeting, and Fed Chairman Ben Bernanke will discuss it at a news conference at 2:15 p.m.

"I think the market has already discounted that the Fed is going to announce more stimulus, so what's more important is what Chairman Bernanke says, which may give us clues on economic activity going forward," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

"We might see a bit of selloff after Bernanke's comments, but we've been up for five straight days, so that shouldn't be surprising."

The MSCI global stock index <.MIWD00000PUS> advanced 0.3 percent to 337.97 points. Earlier in the session it touched a high of 338.23 points, its strongest level in nearly two months.

U.S. stocks were mostly higher. The Dow Jones industrial average <.DJI> gained 9.85 points, or 0.07 percent, to 13,258.29. The Standard & Poor's 500 Index <.SPX> gained 1.81 points, or 0.13 percent, to 1,429.65. The Nasdaq Composite Index <.IXIC> dropped 0.54 points, or 0.02 percent, to 3,021.76.

The FTSEurofirst 300 index <.FTEU3> was little changed at 1138.82 points.

Oil prices rose on prospects of further U.S. stimulus. Brent crude futures were up $1.20 to $109.21 a barrel. U.S. crude was up 47 cents at $86.26 a barrel.

Copper prices rose slightly on Wednesday and were near their two-month highs.

Gold was steady around $1,708 an ounce. Further easing monetary measures would likely support gold by stoking inflation fears and maintaining pressure on long-term interest rates, the opportunity cost of holding non-yielding bullion.

After the Fed meeting, investors attention should quickly refocus on talks in Washington to avert the "fiscal cliff" of automatic spending cuts and tax increases that many fear would tip the U.S. economy back into recession next year.

Negotiations intensified as President Barack Obama and U.S. House of Representatives Speaker John Boehner spoke by phone on Tuesday after exchanging new proposals.

The euro rose 0.3 percent to $1.3036. The Australian dollar rose to a three-month high against the U.S. dollar. The New Zealand dollar touched its highest since February 29, while the U.S. dollar slipped to an eight-week low against its Canadian counterpart.

Many economists forecast the Fed will opt for monthly purchases of $45 billion in Treasury securities. The risk, analysts said, is that policymakers may decide to buy more than that, which would put the dollar under further broad selling pressure.

"All eyes are on the Fed and that has clearly been the driver for this week, at least with the dollar down across the board," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C. "We're seeing high yielders like the aussie and kiwi benefit on expectations of further central bank easing."

But the dollar reached an eight-month high against the yen on bets the Bank of Japan will implement more aggressive monetary easing after an election on Sunday expected to yield a victory for the Liberal Democratic Party.

Treasury prices fell slightly as investors sold to make room for new debt issuance and analysts said the expected Fed action has largely been priced into the market. The benchmark 10-year U.S. Treasury note was down 3/32, with the yield at 1.6644 percent.

(Additional reporting by Angela Moon and Nick Olivari in New York and Richard Hubbard in London Editing by W Simon)