(Corrects headline to weekly not monthly)
* Global stocks near new year high
* Europe stocks up 1.2 percent, Japan 0.6 percent
* Dollar recovers some overnight losses
By Jeremy Gaunt, European Investment Correspondent
LONDON, Aug 28 (Reuters) - World stocks flirted with a year high on Friday and were on track to close with a seventh consecutive week of gains, as investors showed increasing confidence in global economic recovery.
The dollar also rose against a basket of major currencies, recovering somewhat from overnight losses.
MSCI's all-country world stock index <.MIWD00000PUS) was up 0.8 percent at 277.42, less than two points from a more than 10-month high reached on Tuesday.
Europe led the parade, with the FTSEurofirst 300 <.FTEU3> gaining 1.2 percent. Earlier, Japan's Nikkei <.N225> gained 0.6 percent, the last trading day before Sunday's general election.
"There is only one clear trend in the market and that's on the upside. People are coming back with a lot of inflows in favour of equities and outflows are coming from the money market," said Romain Boscher, head of equity management at Groupama Asset Management in Paris.
"The positive sentiment is mainly explained by flows, but also thanks to improved earnings momentum," he said.
Although trading volume has been thin in August, equities have gained for most of the month on the back of hopes for the U.S. economy and global growth.
Fund tracker EPFR Global said that signs of stabilisation in the battered U.S. housing market had prompted investors to commit about $12 billion of fresh money to a wide range of fund groups in late August, but that there was an outflow from money markets.
Similarly, Reuters asset allocation polls released on Thursday found no signs of any serious pull back in August from the risk rally that began in March. [ID:nLR634343]
DOLLAR FIRMS
The dollar clawed back some ground against a basket of currencies while higher yielding and commodity-related currencies edged up against the yen as shares rose.
The U.S currency was hurt by heavy selling late in New York
on Thursday, dropping 0.8 percent against a basket of currencies
<.DXY> in just one hour. It was particularly hard hit against
the Swiss franc
"The dollar is trying to regain some ground because the move we've seen has not developed into a broader risk supportive move," said Ian Stannard, senior currency strategist at BNP Paribas.
Euros traded at $1.4337
Two-year euro zone bonds yields