* U.S. pending home sales slump in September
* Fed meeting could fuel more dollar selling
* S&P 500 ticks up to new record
NEW YORK, Oct 28 (Reuters) - Brent crude rose nearly 2 percent on Monday after Libya's oil exports dropped, while stocks were little changed at record highs on expectations that the Federal Reserve will keep its loose monetary policy in place this week.
The U.S. dollar edged up but held close to a nine-month low against a basket of currencies as Fed policy continued to determine the overall trend.
The Federal Open Market Committee, the Fed's policy-setting arm, is unlikely to make any shift in policy at its two-day meeting that ends Wednesday as it awaits more evidence of how badly Washington's recent budget battle hurt the U.S. economy.
Most risk assets rose last week as the uncertainty caused by the U.S. government shutdown and a mixed batch of economic data convinced many that the Fed would delay any move to begin trimming its stimulus into next year.
With the dollar trading near its lowest levels of the year against most major currencies, however, and the euro near a two-year high and many major global share indexes near record highs, investors were wary of pushing prices higher.
"It may turn out that a neutral FOMC is a green light to keep selling the dollar until November headline data begin appearing in early December, but there is already a lot of dovishness priced in," said Steven Englander, global head of foreign exchange strategy at CitiFX, a division of Citigroup in New York.
The dollar index was up 0.2 percent at 79.337, not far from a near nine-month low of 78.998 touched on Friday. The euro dipped to $1.3782, having touched a high of $1.3833 late last week.
The longer the Fed keeps its policy loose, the longer U.S. yields will stay low, making the dollar less attractive.
U.S. stocks were little changed, with the S&P 500 near the record set on Friday as traders awaited earnings from Apple due after the closing bell.
"The Fed is not going anywhere, which is what caused the rally for the last week-and-a-half, but now the market does feel a little bit tired, it certainly feels like the market is ahead of where the fundamentals say," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
The Dow Jones industrial average edged up 2.84 points, or 0.02 percent, at 15,573.12. The Standard & Poor's 500 Index was up 2.32 points, or 0.13 percent, at 1,762.09. The Nasdaq Composite Index was down 1.99 points, or 0.05 percent, at 3,941.37.
The S&P 500 closed at a record on Friday. The benchmark was stuck in a 5.1 point range on Monday, which could be its tightest for any day in almost eight months.
MSCI's world equity index, which tracks share moves in 45 countries, was up 0.2 percent, marking a fourth day of gains as it climbed back toward last week's peak, last seen in January 2008.
After opening in line with Asian markets' gains, Europe's main indexes turned lower to reflect a more mixed set of corporate earnings and caution over the recent run up.
The broad FTSEurofirst 300 index was down 0.1 percent as it shed some of last week's 0.6 percent gain, which had taken the index to a five-year high.
OIL RISES ON LIBYA, OTHER MARKETS ON FED WATCH
In the oil market, Brent crude briefly hit more than $109 a barrel after a new drop in Libya's oil exports revived supply concerns, while strong gains in U.S. industrial output boosted demand hopes.
Brent rose 1.6 percent to $108.59 a barrel and U.S. crude added 0.4 percent to $98.21 a barrel.
The likelihood that Fed cash will keep flowing into the financial system for longer than many had anticipated supported gold and other metal markets. But after strong gains last week, these markets were also wary of pushing much higher.
Spot gold was up 0.1 percent at $1,353.20 an ounce, after hitting a five-week high of $1,356.50. Copper was also up 0.1 percent at $7,191.50 a ton.
U.S. Treasuries prices were unchanged as investors prepared to make room for this week's $96 billion in longer-dated government debt supply, with yields hovering near three-month lows.
Bond prices pared an initial decline after a surprisingly weak reading on U.S. pending home sales revived some safe-haven bids. Analysts, however, downplayed the market's reception to the disappointing data.
"It's hard to read into the data in the next month or two. They're so skewed," said Justin Lederer, Treasury strategist with Cantor Fitzgerald in New York.
Data is being taken with a grain of salt as a partial federal government shutdown in the first half of October is expected to affect readings.
Benchmark 10-year Treasury notes traded down 3/32 in price to yield 2.5143 percent. The 10-year yield touched a three-month low of 2.471 percent last week in the wake of weak September jobs figures.