* Brent dips, holds near $109 as Libyan output stays low
* S&P 500 hits record, leads global stocks up
* Dollar index jumps the most in almost two months
NEW YORK, Oct 29 (Reuters) - The S&P 500 hit a record on Tuesday to lead global equities higher ahead of a Federal Reserve meeting on the future of the U.S. stimulus program, while the euro hit a one-week low.
The U.S. dollar climbed the most in almost two months against a basket of currencies as the euro, which earlier brushed against last week's two-year high versus the greenback, reversed course.
Wall Street stocks advanced, with the S&P 500 at yet another intraday record high on continued expectations the U.S. Federal Reserve will keep its $85 billion monthly bond purchases intact for several months.
Markets were thrown for a loop in mid-September, when the expectation was high for the Fed to start trimming its monthly purchases. Although many are wary of surprises when the Fed publishes a statement after its two-day meeting concludes on Wednesday, 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.
The Dow Jones industrial average rose 87.64 points, or 0.56 percent, at 15,656.57. The Standard & Poor's 500 Index was up 6.72 points, or 0.38 percent, at 1,768.83. The Nasdaq Composite Index was up 3.59 points, or 0.09 percent, at 3,943.72.
MSCI's world equity index edged up 0.1 percent, trading within last week's range.
In Europe, shares edged higher as results at BP and Saipem fueled a surge in the oil sector, a laggard in this year's equity rally. The FTSEurofirst 300 index closed up 0.4 percent.
The euro hit a one week low against the dollar at $1.3735 but was still close to a two-year high hit last week. The single currency had hit $1.3813 earlier after the European Central Bank's Ewald Nowotny said he does not see any tool the ECB could use against a strong euro.
The dollar gained 0.5 percent against a basket of currencies in its largest percentage gain since early September.
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 ahead of 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 unchanged, the yield at 2.5106 percent.
Spot gold, which earlier rose more than 8 percent from a three-month low in mid-October, fell 0.5 percent to around $1,345 an ounce, pressured further by the dollar strength.
Brent crude fell 1 percent to $108.52 a barrel, though 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 was off 0.6 percent at $98.05.
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.