Dollar extends losses, stocks add to gains after Fed

By Caroline Valetkevitch

NEW YORK (Reuters) - Global stock markets briefly added to gains while the U.S. dollar extended losses on Wednesday after the Federal Reserve decided to leave interest rates unchanged.

U.S. bond yields fell after the statement by the U.S. central bank, which also signalled it still plans two rate increases this year and that it expects the U.S. job market to strengthen. Fed Chair Janet Yellen was due to hold a press conference at 2:30 p.m. EDT (1830 GMT).

Expectations that the Fed would leave rates unchanged rose recently following weak May jobs data and concern over economic repercussions if Britain decides to leave the European Union.

Strategists said that while the Fed decision to leave rates unchanged was widely expected by investors, its statement struck a cautious tone that stood out to some market watchers.

"It's difficult to imagine them getting less aggressive than they are currently. Given the global headwinds, the lowered projections for global growth by the IMF and most governmental organizations that really speak to the global economic health, there is no question that is manifest in the downsizing of expectations," said Peter Kenny, senior market strategist at Global Markets Advisory Group in Berkeley Heights, New Jersey.

The Dow Jones industrial average was up 57.56 points, or 0.33 percent, to 17,732.38, the S&P 500 had gained 6.75 points, or 0.33 percent, to 2,082.07 and the Nasdaq Composite had added 14.61 points, or 0.3 percent, to 4,858.16.

MSCI's all-country world stock index was up 0.6 percent, while the FTSEurofirst 300 finished up 0.9 percent.

The U.S. dollar index was down 0.6 percent.

In the U.S. bond market, benchmark 10-year U.S. Treasury notes rose 9/32 in price to yield 1.582 percent.

(Additional reporting by Chuck Mikolajczak and Gertrude Chavez-Dreyfuss in New York; Editing by Gareth Jones and James Dalgleish)