* World shares gain ground ahead of U.S. rate decision
* Fed expected to keep "low for long" language on rates
* Dollar steady before Fed, euro off lows on Greece aid
(Updates prices)
By Ian Chua
LONDON, March 16 (Reuters) - World stocks rose on Tuesday while the dollar was corralled as investors bet the U.S. central bank will repeat its vow of keeping interest rates low for an extended period.
The Federal Reserve is expected to leave benchmark rates near zero given lingering labour market weakness and nagging doubts about the solidity of the economic recovery. The outcome of the meeting is due at 1815 GMT.
Leaving out 'extended period' in the statement would likely cause U.S. Treasury yields to rise and boost the dollar as it would be seen by the market as a further step towards normalising ultra-loose monetary policy, analysts said.
"The market looks about right in pricing November as the start of the Fed tightening cycle, but the prospect that excess liquidity is withdrawn earlier suggests the risk to U.S. yields and the dollar remains to the upside," said Chris Turner, head of FX strategy at ING.
MSCI's all-country world index rose 0.4 percent, with the pan-European FTSEurofirst 300 gaining 0.7 percent. Japan's Nikkei closed 0.3 percent lower as the market took a breather after having risen to a seven-week high in the previous session.
U.S. stock index futures were all up about 0.2 percent, signalling a firm start on Wall Street.
The Fed's decision comes as investors braced for China to further tighten policy following a recent raft of strong economic data and inflation at a 16-month high in February.
This has been keeping equity investors cautious.
In contrast, the Bank of Japan, which will announce the outcome of its meeting on Wednesday, is seen leaning towards easing monetary policy again, under pressure from a government calling for action to beat deflation.
DOLLAR SOFT
In the forex market, the dollar index, a gauge of its performance against six other currencies, slipped 0.3 percent to 80.005, but held above a three-week low of 79.692 set set on Friday.
"No one seriously expects much change in the Fed's language, but the market thinks that if there is a risk it will be that they are more upbeat, which would benefit the dollar," said Jeremy Stretch, currency strategist at Rabobank in London.
The euro crept up against the dollar and yen as EU finance ministers discussed standby plans drawn up by countries using the euro to provide Greece with financial help if it becomes the first state in 11 years of monetary union to seek such aid.
The single currency hit session highs after data showed German ZEW institute's economic sentiment index came in higher than expected.
It rose 0.4 percent on the day to $1.3722 and gained 0.6 percent to 124.47 yen.
With stocks rising, demand for lower risk government debt eased, driving yields higher. The benchmark U.S. 10-year note yield climbed 1.3 basis points to 3.71 percent, while the euro zone benchmark German Bund yield edged up 1.8 basis points to 3.172 percent.
U.S. crude futures rose 0.5 percent to $80.18 a barrel, recovering from a 1.8 percent slide to the lowest close in two weeks on Monday.
Spot gold rose to around $1,115 an ounce, up more than $4 from New York's notional close, while copper prices gained 1.2 percent to $7,385 a tonne. (Additional reporting by Tamawa Desai and Jessica Mortimer, editing by Mike Peacock)