GLOBAL MARKETS-U.S. stocks zig-zag as rally fatigue sets in

* U.S. stocks range-bound after touching 13-month high

* Dollar rises off 15-month low as risk appetite eases

* Sterling drops on Fitch credit-worthiness warning (Updates with U.S. markets, changes byline, dateline, previous LONDON)

By Manuela Badawy

NEW YORK, Nov 10 (Reuters) - U.S. stocks zig-zagged on Tuesday as investors took a breather after the Dow Jones industrial average touched a fresh 13-month high while the U.S. dollar rose from a 15-month low as risk appetite eased.

A day after markets rallied on expectations that U.S. interest rates will stay near zero well into next year, encouraging investors to use the dollar to fund carry trades in higher-yielding assets, markets paused to trade range-bound.

"Monetary and fiscal stimulus has clearly taken hold, and has resulted in an initial growth spurt that has been sharp and fast," noted Bob Doll, chief investment officer for global equities at BlackRock in New York.

"At some point, we believe markets will require clearer evidence that corporate revenue growth is sustainable, and unless or until that occurs, we should see some continued back-and-forth action in the markets."

At midday (1700 GMT) in New York, the Dow Jones industrial average <.DJI> was down 5.89 points, or 0.06 percent, at 10,221.05. The Standard & Poor's 500 Index <.SPX> was down 2.79 points, or 0.26 percent, at 1,090.29. The Nasdaq Composite Index <.IXIC> was down 7.76 points, or 0.36 percent, at 2,146.30.

Meanwhile, sterling fell broadly after Fitch Ratings said Britain was the major economy most at risk of losing its AAA rating. Sterling fell as low as $1.6600 , before recovering to $1.6671.

The dollar was up against a basket of six major trading-partner currencies, with the U.S. dollar index <.DXY> up 0.15 percent at 75.139. The euro was down 0.31 percent at $1.4947.

Risk appetite eased as the sell-off in U.S. dollars abated, having "moved a little too far, too quickly," said John Doyle, foreign exchange strategist at Tempus Consulting in Washington, yet the trend towards dollar weakness remains in place.

Meanwhile U.S. crude oil dropped $1 to $78.43 a barrel as the dollar firmed and energy companies began to restore operations in the Gulf of Mexico after Tropical Storm Ida passed without major incident.

Oil prices have risen 77 percent so far this year but they are still nearly 47 percent below their high of more than $147 a barrel struck in July last year.

Weakness in Wall Street stocks, anxiety over Britain's credit-worthiness and weak overseas economic data spurred a safety bid for U.S. Treasuries.

U.S. Treasury debt price also rose as traders anticipated a strong reception to a $25 billion auction of benchmark 10-year notes after a robust response in Monday's first leg of this week's $81 billion quarterly refunding.

The 10-year note was up 4/32 in price, with the yield, which moves inversely to price, at 3.48 percent.

The December bund futures rose 33 ticks after a ZEW survey showed German economic sentiment fell for the first time in three months to hit its lowest since July.

MSCI world equity index <.MIWD00000PUS> fell 0.2 percent, while the FTSEurofirst 300 index <.FTEU3> slipped 0.2 percent. In Asia <.MIAPJ0000PUS> emerging stocks rose 0.6 percent.

Emerging stocks <.MSCIEF> rose 0.2 percent. (Additional reporting by Natsuko Waki in London and Angela Moon and Nick Olivari in New York; Editing by James Dalgleish)