Shares up in Europe and Asia before Fed meets; dollar steady

LONDON (Reuters) - European shares followed Asian stocks higher on Wednesday and the dollar held steady before a Federal Reserve meeting that's expected to lay the groundwork for the first increase in U.S. interest rates in nearly a decade.

The Fed is widely expected to remove the word "patient" from its statement on the timing of its first hike since 2006, possibly paving the way for policy tightening as early as June.

"Our base case is that they will remove `patience'. If we get that and a measured message on the dollar's impact on inflation then, given the slight retracement we have seen in the first half of this week, I think the dollar will do well," said Michael Sneyd, a currency strategist with BNP Paribas in London.

The pan-European FTSEurofirst 300 stocks index <.FTEU3> rose 0.2 percent at 1,587.40 points, led by Spanish fashion giant Inditex , which reported a rise in 2014 profit.

Earlier, shares rose across Asia. Tokyo's Nikkei index <.N225> rose 0.6 percent to a 15-year high on expectations of economic recovery and higher shareholder returns.

Chinese stocks rose for a sixth successive session in anticipation of fresh government stimulus. The CSI300 index <.CSI300> of the largest listed companies in Shanghai and Shenzhen rose 2.4 percent. China's average new home prices fell at their fastest pace on record last month, data showed on Wednesday.

MSCI's main index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 1.9 percent.

The dollar, which has risen more than 20 percent against major currencies over the past year in anticipation of higher U.S. rates, held steady before the Fed announcement, due at 1800 GMT, and a news conference by Fed Chair Janet Yellen 30 minutes later.

While the trajectory of U.S. rates is clear, some analysts say recent weak economic data may delay any move beyond June.

"The impact from the dollar's rally already represents a form of tightening, so the Fed is in no rush to raise interest rates," said Philippe Ithurbide, head of research, analysis and strategy at Amundi. The first increase might not come until after September, he said.

Against a basket of its peers, the U.S. currency was down less than 0.1 percent <.DXY>.

U.S. Treasury yields edged down after falling in New York on Tuesday following weak housing starts data. Ten-year yields were last at 2.05 percent, compared with 2.06 percent in New York.

The euro , which fell to a 12-year low last week as the European Central Bank began a 1 trillion-euro bond-buying program designed to boost growth and inflation, was up 0.1 percent at $1.0607. The dollar was barely changed at 121.30 yen .

Sterling was flat at $1.4746 before closely watched wage and unemployment data and finance minister George Osborne's last national budget before parliamentary elections on May 7.

Political uncertainty pushed the pound to a five-year low against the dollar on Friday. Depending on the outcome, the election could trigger a referendum on whether Britain will stay in the European Union.

BUND AUCTION

German government bond yields fell before an auction of 10-year debt expected to meet strong demand, amid concern the ECB's bond-buying will lead to a scarcity of top-rated debt. Ten-year yields fell 1.8 basis points to 0.266 percent.

Brent crude oil edged down towards $53 a barrel after a forecast that U.S. crude stockpiles would reach record highs, maintaining a global supply glut. Brent last traded at $53.46.

Gold lifted off four-month lows, with market participants cautious before the Fed announcement. Spot gold last traded at $1,147.10 an ounce.

(Additional reporting by Blaise Robinson in Paris, Patrick Graham in London and Shinichi Saoshiro in Tokyo; Editing by Larry King)

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