* Dollar rises from 15-month lows after Fed comments
* World stocks fall from 2009 highs in risk aversion
* Oil, gold end a tad higher, shrug off dollar rise
(Updates with closing prices)
By Manuela Badawy
NEW YORK, Nov 17 (Reuters) - The U.S. dollar rose on
Tuesday as investors took a breather selling the currency,
driving down European and Asian stocks.
Investors paused selling the U.S. dollar, which hit a
15-month low on Monday, after Federal Reserve Chairman Ben
Bernanke acknowledged the dollar's slump was causing some
prices to rise but said other factors restraining inflation
were winning the day.
U.S. stocks rose at the end of business on Tuesday to fresh
13-month highs as upbeat broker views on improving prospects
for two Dow components offset disappointing spending outlooks
from retailers Target <TGT.N> and Home Depot <HD.N>.
Bernanke's comments on Monday dulled risk appetite and
caused investors to cut bets against the dollar.
The MSCI world equity index <.MIWD00000PUS> fell 0.46
percent, having hit its highest since September 2008 on Monday,
as investors stepped back from risk trades and took a breather
from an eight-month rally that has pushed the index 75 percent
higher.
The Dow Jones industrial average <> ended up 0.29
percent, at 10,437.42. The Standard & Poor's 500 Index <.SPX>
rose 0.09 percent, at 1,110.32, while the Nasdaq Composite
Index <> rose 0.27 percent, at 2,203.78.
Investors shrugged off a weaker-than-expected U.S.
industrial production report which earlier in the day pressured
the stock market on concerns about the sustainability of the
economic recovery. For story on data see [].
COMMODITIES SHRUG DOLLAR
A weaker dollar typically supports commodity prices because
dollar-priced contracts -- such as those for oil and gold --
become cheaper for buyers using other currencies.
Despite a rebound in the dollar, commodities such as oil
and gold ended slightly higher on the day on short-covering.
Crude oil <CLc1> rose 23 cents to $79.13 a barrel supported
by a rally in refined product futures, while gold prices <XAU=>
rose 65 cents to $1140.60, just a tad lower from a record high
of $1,143.25 touched on Monday.
Meanwhile, a report showed U.S. industrial production rose
by a smaller-than-expected 0.1 percent in October as auto
manufacturers scaled back following the end of the "cash for
clunkers" government incentive program.
Investors are worried about the sustainability of the
economic recovery when stimulus spending winds down.
"All of this adds up to concern in the markets today about
the strength and durability of the recovery and will weigh on
recent gains," said Jim Awad, managing director at Zephyr
Management in New York.
WORRIES ON THE DOLLAR
The euro <EUR=> fell 0.65 percent at $1.4875 while the
dollar index <.DXY> rose 0.5 percent against a basket of major
currencies.
The Fed -- the U.S. central bank -- has kept benchmark
interest rates near zero and pumped hundreds of billions of
dollars into the financial system to counter the worst
recession in 70 years.
The dollar has been under pressure as the U.S. economy has
lagged other economies in recovering from the global crisis.
For the dollar to reverse its long-term downtrend, analysts
say China needs to take steps toward a more flexible currency
regime, or the Fed has to signal imminent rate hikes.
"Neither of those prerequisites have been fulfilled, so the
controlled grinding lower of the dollar will continue," said
Johan Javeus, strategist at SEB in Stockholm.
U.S. Treasury debt prices edged higher, pushing 30-year
bond <US30YT=RR> yields to two-week lows as a temporary
pullback in stocks gave safe-haven bonds a slight boost.
The benchmark 10-year Treasury note <US10YT=RR> rose 6/32 in
price for a yield of 3.32 percent versus 3.34 percent at
Monday's close.
The FTSEurofirst 300 <> index of top European shares
ended 0.4 percent lower at 1,030. The index is up 24 percent in
2009.
Emerging stocks market <.MSCIEF> fell 0.21 percent.
Japan's Nikkei stock average <> fell 0.6 percent on
Tuesday, as Tokyo market players said a host of domestic
factors, including economic uncertainty amid renewed talk of
deflation and the sense that government initiative on this is
lacking, kept Japanese shares under pressure.
(Editing by Kenneth Barry)
