Dollar weakens, stocks gain before Fed meeting; oil up

The US dollar weakened and world stock indexes rose on Monday as investors expected the US Federal Reserve to leave interest rates unchanged this week, while oil prices bounced back from multi-week lows.

US Treasuries yields dipped as traders booked profits ahead of this week's Fed policy meeting as well as the Bank of Japan's policy meeting.

Weak recent US data has boosted bets that the Fed would skip a chance to raise rates at this meeting.

In Japan, policymakers could well go in the opposite direction by easing policy, though conflicting reports on what it might do have stoked uncertainty.

Sources have said the BoJ will consider making negative interest rates the centerpiece of future easing by shifting its prime policy target away from base money.

Both policy meetings are scheduled for September 20-21. "The market is resigned to believe that (the Fed is) not going to raise rates this week," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie in New York.

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.38 per cent at 95.744 after hitting a 15-day high of 96.108 on Friday.

In early trading, benchmark 10-year Treasury notes were up 1/32 in price for a yield of 1.696 per cent, down 0.5 basis point from late on Friday.

Oil prices rose after Venezuela said Opec and non-Opec producers were close to a deal to stabilise the market. Brent crude futures were up 1.8 per cent at $46.57 a barrel at 1337 GMT and US crude was up 1.9 per cent at $43.83.

A firmer oil price bolstered energy company shares on bourses around the world, with the S&P 500 energy index up 0.8 per cent. Last week, Brent hit a two-week low and US crude fell to a five-week low.

The Dow Jones industrial average was up 94.67 points, or 0.52 per cent, to 18,218.47, the S&P 500 had gained 9.54 points, or 0.45 per cent, to 2,148.7 and the Nasdaq Composite had added 16.20 points, or 0.31 per cent, to 5,260.77.

MSCI's all-country world stock index was up 0.7 per cent, while European shares were up 1 per cent.

Assuming no move on Fed policy, the focus will be on the FOMC's forecasts for the funds rate.

There was little discernible market reaction to weekend bombings in New York City and New Jersey and a stabbing at a Minnesota shopping mall.