GLOBAL MARKETS-Stocks rally, dollar gains on Yellen 'stay course' remarks
* Stocks surge as Yellen pledges to stay course on Bernanke policies
* Dollar rises, oil prices steady on Yellen's congressional remarks
* Gold hits three-month high, U.S. government debt sells off
NEW YORK, Feb 11 (Reuters) - The dollar and global equity markets rallied on Tuesday after Federal Reserve Chair Janet Yellen said she expects the U.S. central bank to continue trimming its bond purchases, a sign the Fed believes the economy is on track for further growth.
Stock indices on Wall Street surged more than 1 percent while the U.S. currency rebounded against the euro and gained against the yen after Yellen's testimony before the House Financial Services Committee.
Yellen said recent volatility in global financial markets did "not pose a substantial risk to the U.S. economic outlook" and reiterated that the Fed was on track to keep scaling back its economic stimulus.
A potential market headwind also appeared to be removed after Republican leaders in the U.S. House of Representatives agreed to advance legislation that extends Washington's borrowing authority for a year without conditions.
A vote expected late Tuesday would mark a dramatic shift from the confrontational fiscal tactics House Republicans have used over the past three years, culminating in last October's 16-day shutdown of the federal government in Washington.
The benchmark S&P 500 posted its best four-day performance in 13 months, gaining almost 4 percent, and was within 1.5 percentage points of its all-time high reached a month ago.
Stocks in Europe, emerging markets and Canada also rallied as Yellen emphasized continuity in the Fed's policy, saying she strongly supports the tact of her predecessor, Ben Bernanke.
"The last thing she wants to do at this point is complicate things or muddy a well-established message. 'Do no harm' is her motto unless the data changes more than we have seen so far," said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.
MSCI's all-country world index, which measures stock performance in 45 countries, and its emerging markets index both gained 1.1 percent.
In Europe, the FTSEurofirst 300 index of leading regional shares closed up 1.25 percent at 1,317.30. Stock markets in Brazil and Mexico jumped more than 1.5 percent, while Bay Street in Toronto rose 0.93 percent.
On Wall Street, the Dow Jones industrial average rose 219.05 points, or 1.39 percent, to 16,020.84. The S&P 500 gained 22.42 points, or 1.25 percent, to 1,822.26 and the Nasdaq Composite added 47.533 points, or 1.15 percent, to 4,195.707.
"'Stay the course' is in my opinion the message the Street wanted to hear," said Phil Orlando, chief equity strategist at Federated Investors in New York. "The Fed believes these weather issues, these (emerging market) issues are transitory and we are in a sustainable growth path for U.S. GDP."
The dollar came off nearly two-week lows after Yellen signaled there would no immediate deviation from the Fed's winding down of its massive bond purchases.
The U.S. currency jumped 0.4 percent against the Japanese yen to 102.65, while the euro fell 0.07 percent to 1.3635.
U.S. Treasuries slid after Yellen said she strongly supported the Fed's monetary policy strategy, suggesting its current reduction in bond purchases was on track. Her remarks dispelled fears the economy was worse than expected.
The price of benchmark 10-year Treasury notes fell 12/32 to yield 2.7222 percent.
Gold hit a three-month high and oil prices rose, with Brent crude edging above $109 a barrel.
Brent crude rose 5 cents to settle at $108.68 a barrel. U.S. crude edged down 12 cents to settle at $99.94.
Gold futures for April delivery rose 1.3 percent to $1,291.40 an ounce.