Dollar falls, Wall Street up in volatile post-Fed trading

NEW YORK (Reuters) - The dollar extended losses against the euro and yen, while U.S. stocks gained in volatile afternoon trading, after the Federal Reserve indicated there would be a rate hike by the end of the year.

The U.S. central bank said the economy was likely strong enough to support an interest rate increase by the end of the year, though it also lowered its expectations for 2015 economic growth because of a weak start to the year.

The Fed has said that it would first raise rates when it deems the economy strong enough to handle it. Analysts are torn on whether the first hike in about 10 years will occur in September or December.

Investors also continued to watch the uncertain situation in Greece, fretting about the potential fallout if the country was unable to avoid a default on IMF loans, which could result in it leaving the euro or the European Union.

"I haven't figured out whether the rate hike will be in September or December, but I think September is more likely, and I would prefer to get it out of the way," said Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York.

"People have been expecting a rate hike to come, and the market is ready for that. At the same time, we're also still worried about Greece."

The MSCI International ACWI Price Index rose 0.2 percent on the day.

The Dow Jones industrial average rose 30.26 points, or 0.17 percent, to 17,934.74, the S&P 500 gained 3 points, or 0.14 percent, to 2,099.29 and the Nasdaq Composite added 8.63 points, or 0.17 percent, to 5,064.19.

The benchmark 10-year U.S. Treasury note fell 3/32 in price, pushing the yield up to 2.3272 percent. The U.S. dollar index , which measures the greenback against a basket of currencies, fell 0.5 percent.

Euro zone finance minister are due to meet on Thursday, but there was talk of plans being put in place for another emergency summit over Greece at the weekend. Jeroen Dijsselbloem, the president of Eurogroup finance ministers, said there was a "very small" chance that a deal would be reached at the meeting.

The pan-European FTSEurofirst 300 index closed down 0.5 percent. The euro rose 0.6 percent to $1.1314.

In the commodity space, U.S. crude futures fell 0.5 percent to $59.69, while Brent crude fell 0.1 percent to $63.66 per barrel. Oil trading was volatile after government data showed a surprise gasoline inventory build last week, even as production eased. [O/R]

Gold prices rose 0.2 percent, while silver rose 0.5 percent. Copper was down 0.1 percent, slightly building on recent weakness, which saw the metal down more than 1 percent in both Monday's and Tuesday's sessions.

(Editing by Nick Zieminski)