* Global stocks slip but Wall St rebounds on rally outlook
* Dollar at 1-month high vs euro, yen as bond yields rise
* Oil hits 25-month high on heavy U.S. inventory drawdown
* U.S. bonds rebounds as two-day sell-off lures buyers (Adds close of U.S. markets)
By Herbert Lash
NEW YORK, Nov 10 (Reuters) - The dollar hit a one-month high on Wednesday after data pointed to an improving U.S. labor market while Wall Street rose as investors set aside recent worries whether a rally would continue.
But global stocks fell as Ireland's borrowing costs hit another euro lifetime high and investors worried that a Federal Reserve move announced last week to buy $600 billion in Treasury debt to bolster the U.S. economy may have unintended consequences.
The dollar extended gains as a rise in U.S. bond yields for most of the session prompted traders to reduce bets against the greenback. Oil prices soared to their highest level in 25 months, breaking their recent strong inverse correlation with the dollar. For details see: [ID:nN10217810] [ID:nSGE6A906T]
Investors have sold dollars in recent months and bet that the Fed's plans to pump more money into the U.S. economy to boost growth would drive already low U.S. rates even lower. So far, those expectations have been frustrated.
"The U.S. yield curve has steepened, and since the whole world has had the same position on, we've got a lot of end-of-the-year, risk management going on," said Sebastien Galy, senior currency strategist at BNP Paribas.
The euro fell as low as $1.3671 and was last changing hands
at $1.3777
The dollar climbed as high as 82.79 Japanese yen
A decline in initial U.S. jobless claims had some analysts suggesting the American economy was starting to gain traction after months of sluggish growth. [ID:nN0986897]
Global stocks slipped 0.7 percent, as measured by MSCI's all-country world index <.MIWD00000PUS>, but Wall Street rose.
Trading in Tokyo was poised to open lower, with the December futures contract that trades in Chicago for the Nikkei 225 <0#NK:> down 20 points at 9,860.
U.S. stocks gained as rising oil prices lifted energy shares and banks rebounded after suffering 3 percent losses over the past two sessions.
The S&P 500 Financials index <.GSPF> gained 1.4 percent and
was the best performer of the S&P 500's top 10 sectors. The S&P
energy index <.GSPE> ended up 1.3 percent as U.S. crude for
December delivery
Oil has gained seven of the last eight sessions, pushing prices up $6.38 a barrel, or 7.8 percent.
Stocks still have upside momentum, especially after falling about 1 percent in the previous two sessions, said Randy Frederick, director of trading and derivatives at the Schwab Center for Financial Research in Austin, Texas.
The Dow Jones industrial average <.DJI> closed up 10.29 points, or 0.09 percent, at 11,357.04. The Standard & Poor's 500 Index <.SPX> gained 5.31 points, or 0.44 percent, at 1,218.71. The Nasdaq Composite Index <.IXIC> rose 15.80 points, or 0.62 percent, at 2,578.78.
U.S. stocks were down earlier as investors worried the Fed might buy less debt than planned, while others feared the increased liquidity has propelled commodity prices higher, which could induce a harmful bout of inflation.
U.S. cotton futures charged to an all-time high but closed sharply lower for the first time in nine sessions as heavy investor selling and profit-taking finally deflated the market's record run, analysts said. [ID:nSGE6A902R]
Precious metals, however, steadied after futures of gold, and particularly silver, plunged in after-hour trade the previous session. [ID:nLDE6A90S9]
Gold hit a record high near $1,425 an ounce on Tuesday.
U.S. gold futures for December delivery
Silver for December delivery
U.S. Treasuries slid in volatile trade after a weak auction of 30-year government debt, although bargain hunting pulled bonds off the day's lows and led a rebound. [ID:nN10192793]
The benchmark 10-year U.S. Treasury note
The poor bond auction highlighted worries that demand for longer-dated debt is dwindling after that sector of the yield curve was sidelined by the Fed's $600 billion purchase plan.
The dollar was up against a basket of major currencies, with the U.S. Dollar Index <.DXY> up 0.25 percent at 77.64.
Japan's Nikkei average <.N225> closed up 1.4 percent, led by exporters, which were among the chief beneficiaries of the dollar's rise. The MSCI index of Asian shares outside of Japan <.MIAPJ0000PUS> fell 0.8 percent. (Reporting by Gertrude Chavez-Dreyfuss and Emily Flitter in New York; Christopher Johnson and Amanda Cooper in London; Writing by Herbert Lash; Editing by Kenneth Barry)