* 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 mixed economic data convinced many that the Fed would delay any move to begin trimming its stimulus into next year. With the S&P 500 at a record high, however, traders are shying away from more large bets.
"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 rose 18.96 points or 0.12 percent, to 15,589.24, the S&P 500 gained 3.86 points or 0.22 percent, to 1,763.63 and the Nasdaq Composite dropped 0.675 points or 0.02 percent, to 3,942.686.
MSCI's world equity index, which tracks share moves in 45 countries, was up 0.25 percent, marking a fourth day of gains as it climbed back toward last week's peak, last seen in January 2008.
The FTSEurofirst 300 closed down 0.14 percent and the euro zone's blue-chip Euro STOXX 50 lost 0.4 percent.
U.S.-dollar denominated Nikkei futures rose 0.9 percent.
OIL RISES ON LIBYA, OTHER MARKETS ON FED WATCH
In the oil market, Brent crude hit more than $109 a barrel, bouncing off a more than two-month low, after a drop in Libyan oil exports revived supply concerns. Oil production in the OPEC member dropped after new protests over the weekend at its oil fields and ports.
Brent rose 2.1 percent to $109.20 a barrel and U.S. crude added 0.6 percent to $98.47 a barrel.
The likelihood that Fed cash will keep flowing into the financial system for a while supported gold and capped gains on the U.S. dollar.
The dollar index was up 0.1 percent at 79.302, not far from a near nine-month low of 78.998 touched on Friday. The euro dipped to $1.3792, having touched a high of $1.3832 late last week.
The longer the Fed keeps its policy loose, the longer U.S. yields will stay low, making the dollar less attractive.
Spot gold was up 0.2 percent at $1,354.16 an ounce, after hitting a five-week high of $1,356.50. Copper was little changed at $7,185.25 a ton.
U.S. Treasuries prices were slightly lower as investors made 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 2.5124 percent. The 10-year yield touched a three-month low of 2.471 percent last week in the wake of weak September jobs figures.