* World stocks firm, post best week so far in 2011
* Greenback rallies as tightening seen soon
* Gold slips on dollar strength
* Oil dips but Mideast, Libya lend support (Updates to U.S. markets' close)
By Rodrigo Campos
NEW YORK, March 25 (Reuters) - Global stocks posted their best week since December on Friday, while the dollar rallied after a Federal Reserve official said the U.S. central bank should tighten monetary policy soon.
Helped by a rise in tech shares after an upbeat outlook from Oracle Corp the day before, the S&P 500 notched its best week in two months. But low volume spurred questions about the equities rally's strength.
"Overall, I keep looking at the pluses and minuses and this week has been spectacular with respect to everybody ignoring the minuses," said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
The MSCI All-Country index <.MIWD00000PUS> gained 0.2 percent, up for seven straight sessions and posting its best week since early December.
Volume has dwindled in U.S. and other equity markets as violence in the Middle East and northern Africa, coupled with Japan's natural disasters two weeks ago and its nuclear power crisis, obscure the outlook for the global economic recovery.
The Dow Jones industrial average <.DJI> gained 50.03 points, or 0.41 percent, to 12,220.59. The Standard & Poor's 500 <.SPX> rose 4.14 points, or 0.32 percent, to 1,313.80. The Nasdaq Composite <.IXIC> added 6.64 points, or 0.24 percent, to 2,743.06.
The dollar rallied after several top Federal Reserve officials said the U.S. central bank is unlikely to extend its bond-buying stimulus program beyond a planned $600 billion.
Philadelphia Fed Bank President Charles Plosser also said the Fed will have to reverse its easy money policy in the "not-too-distant future" to avoid sowing the seeds of inflation, changing the outlook for interest rates. Plosser is a voting member of the Fed's policy committee.
The euro and yen hit session lows versus the greenback after Plosser's comments, adding to strength in the U.S. currency after government data showed the U.S. economy grew more quickly than thought in last year's fourth quarter.
The dollar index <.DXY>, a gauge of the greenback against a basket of major currencies, jumped 0.7 percent.
The euro
The yen traded at 81.36 from a session low of 81.49 per
dollar
European leaders reached an agreement on anti-crisis measures at a summit but had to delay increasing their rescue fund and faced problems from Portugal's government collapse. [ID:nLDE72N0NZ] and [ID:nLDE72O0Q7].
The crisis could force Lisbon to request a bailout and make it the third euro-zone country to seek aid after Greece and Ireland.
Portuguese bond yields hit new highs after Standard & Poor's downgraded the country's debt ratings and warned it could cut them again.
Ireland's prime minister made a plea to the European Central Bank to extend its lifeline to the country's banks, giving Dublin more time to tackle its problems.
Spain's Prime Minister Jose Luis Rodriguez Zapatero said he did not fear contagion from a potentially prolonged period of political instability in Portugal. [ID:nLDE72O1EF]
European shares closed slightly higher on stronger economic
signs and corporate results, but the debt crisis kept gains in
check.
Graphic on world stock polls: http://r.reuters.com/juw68r
European sovereign debt crisis: http://r.reuters.com/hyb65p
OIL, PREY TO MIDEAST
U.S. crude
Spot gold
Japan's Nikkei index <.N225> rose 1.1 percent to post its best week since November as foreign investors scooped up battered shares. In the previous two weeks, the Nikkei had lost nearly 14 percent.
But U.S. dollar-denominated Nikkei futures