* Brent dips but holds above $109 on supply concerns
* S&P 500 hits record, buoys global stocks
* Dollar index rises the most in almost two months
Major U.S. stock indexes closed at record highs on Tuesday to lead global equities higher ahead of word from the Federal Reserve on the future of its stimulus program, while the U.S. dollar climbed the most in almost two months.
The Dow industrials and the S&P 500 closed at their highest levels ever on continued expectations the Fed, at the end of its policy-setting meeting on Wednesday, will keep its $85 billion monthly bond purchases intact.
Markets were thrown for a loop in mid-September, when the expectation was high for the Fed to start trimming its monthly purchases. Although some are wary of surprises when the Fed publishes a statement after its two-day meeting concludes, most see the recent rally in riskier assets and a dollar selloff as largely factoring in the decision.
"The Fed surprised me by not tapering in September and the key reason they cited was the fact inflation is running very moderately, and they still have lots of room on the inflation front," said Doug Foreman, co-chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles.
"Certainly, the data today didn't give them anything different to think about that."
U.S. producer prices unexpectedly fell in September and the increase in the annual rate was the smallest in nearly four years.
After the closing bell in New York, the Dow Jones industrial average rose 111.42 points or 0.72 percent, to 15,680.35, the S&P 500 gained 9.84 points or 0.56 percent, to 1,771.95 and the Nasdaq Composite added 12.209 points or 0.31 percent, to 3,952.338.
The Dow and S&P closed at record highs while the Nasdaq ended at its highest since Sept. 8, 2000.
MSCI's world equity index rose 0.25 percent, trading this week within last week's range.
The U.S. dollar rose for a third straight session against major counterparts as traders bought back the currency on a view that markets already priced in expectations the Federal Reserve will maintain its bond-buying program in coming months.
Traders also said the dollar's latest drop, which took it to a nine-month low against a basket of currencies on Friday, may have been overdone. But sentiment remains negative and investors will likely see any rebound as a selling opportunity.
The dollar index rose 0.5 percent to 79.624 in its largest percentage gain since early September, while the euro hit a one-week low against the greenback at $1.3735 but was still close to a two-year high hit last week.
U.S. Treasuries prices were flat, with yields close to three-month lows. The light trading volume suggested traders were reluctant to make big bets during the Fed meeting and as the Treasury Department sought to sell $96 billion in coupon-bearing debt this week.
"The market is directionless. There is no urgency to push yields higher or lower," said Lou Brien, market strategist at DRW Trading in Chicago.
Benchmark 10-year Treasury notes were up 2/32, the yield at 2.5034 percent.
Spot gold, which is up more than 7 percent from a three-month low hit mid-October, fell 0.5 percent to around $1,346 an ounce, pressured by the dollar strength.
Brent crude settled down 0.55 percent at $109.01 a barrel, though some traders said this was a consolidation after a 2.5 percent gain the previous day, when reports of a sharp drop in Libyan oil exports rekindled worries over global supply. U.S. crude settled down 0.5 percent at $98.20.
Libya's crude oil exports have dropped to less than 10 percent of capacity as the government has struggled to reach a deal with protesters blocking its big eastern facilities, with some demanding a greater share of the oil wealth.