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GLOBAL MARKETS-U.S. dollar, bond yields climb, with focus on Fed

* Dollar inches up after economic data

* U.S. stocks lower in early trading

* Oil rallies as Saudi Arabia vows to cap exports (Updates with morning U.S. market activity, changes dateline, previous LONDON)

NEW YORK, July 24 (Reuters) - The U.S. dollar rose from its lowest level in more than a year and U.S. Treasury yields climbed on Monday as investors braced for news from this week's U.S. central bank meeting and possible hints on when the next interest rate hike is coming.

Further developments in Washington, including on U.S. President Donald Trump's inner circle's possible ties to Russia, as well as weak U.S. economic data and reduced inflation expectations, have weighed on the dollar for much of the month.

The dollar rose against a basket of six major currencies, bouncing off a 13-month low in early trading, buoyed by strong U.S. data on Monday. The dollar index was last trading 0.15 percent higher at 94.006.

Many analysts and investors expect the Federal Reserve to announce that it will begin reducing its bond portfolio at its September meeting, but will await firmer indications on the timing of this effort at this week's meeting which begins Tuesday.

Further interest rate hikes are not seen as likely until December. Futures traders are pricing in a 47-percent chance that the Fed will raise rates at its December meeting, according to the CME Groups FedWatch Tool.

Benchmark 10-year notes were last down 4/32 in price to yield 2.25 percent, up from 2.23 percent on Friday. The yields have fallen from 2.40 percent on July 7. Treasuries have rallied in the past two weeks on what analysts said are mainly technical factors.

"Momentum that had been oversold is shifting increasingly to overbought, which sets this week up to be about the data and about the Fed," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York.

Data this week includes U.S. gross domestic product for the second quarter which is due on Friday.

The dollar rose against a basket of six major currencies, bouncing off a 13-month low touched in early trading. The dollar index was last trading 0.15 percent higher at 94.006.

The euro earlier hit an almost two-year high against the dollar, largely shrugging off regional data showing euro zone business growth slowed last month and weighing on exporters' shares.

The euro was last trading at $1.1634, slightly below a high of $1.1684 hit earlier in the day, its highest since August 2015.

Stocks on global markets slipped, with U.S. stock indexes down slightly. Johnson & Johnson's shares fell 1.5 percent after South Korea's Samsung Bioepis said it started U.S sales of the company's top-selling drug Remicade.

The Dow Jones Industrial Average was down 68.13 points, or 0.32 percent, to 21,511.94, the S&P 500 had lost 4.44 points, or 0.18 percent, to 2,468.1 and the Nasdaq Composite had dropped 1.70 points, or 0.03 percent, to 6,386.05.

European shares were also down.

Oil reversed earlier falls to advance after leading OPEC producer Saudi Arabia pledged to limit exports next month.

Brent September crude futures were up 44 cents on the day at $48.50 a barrel, while NYMEX crude for September delivery rose 39 cents to $46.16.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s

(Additional reporting by Nigel Stephenson in London, Karen Brettell and Dion Rabouin in New York; Editing by Bernadette Baum)