* MSCI world equity index up 0.9 percent at 290.45
* Broadly weak USD sets 1-year low vs euro before Fed, G20
* Oil firmer; government bonds lower
By Natsuko Waki
LONDON, Sept 22 (Reuters) - World stocks and oil climbed on Tuesday ahead of the Federal Reserve's two-day policy meeting, while investors' search for higher returns pushed the dollar down to a one-year low against the euro.
European equities and U.S. stock futures followed Asia markets higher, while safe-haven U.S. and German government bond prices and the low-yielding dollar all retreated.
The latest leg of the rally in risk assets, which helped world stocks recoup more than half of last year's losses, stemmed from repeated pledges by G20 policymakers to keep emergency economic support in place.
The G20 summit in Pittsburgh on Thursday and Friday is expected to underline that commitment while the Fed's Open Market Committee is expected to do likewise when its latest meeting ends on Wednesday.
"The fundamental position for all equity markets has just been improving and we know that the central banks, particularly the UK and, importantly, the Federal Reserve, are committed to keep interest rates low for a long period of time," said Mike Lenhoff, chief strategist at Brewin Dolphin.
MSCI world equity index rose 0.9 percent, closing in on last week's 11-month high. The index has risen over 27 percent since January.
The FTSEurofirst 300 index rose more than 1 percent while emerging stocks rose 0.9 percent. U.S. stock futures were up 0.7 percent.
The dollar fell as low as $1.4821 per euro, while the New Zealand dollar -- often seen as a bellwether of global risk appetite -- surged to a 13-month high above $0.7230.
Energy stocks advanced as crude oil gained 1.6 percent to $70.87 a barrel, bouncing back after its 3 percent decline on Monday.
The Fed is expected to keep its benchmark Fed Funds rate unchanged at 0.25 percent. Investors are looking for signs of how quickly it might remove its extraordinary programmes to revive lending and economic activity.
DOLLAR WARY OF G20
Although trading volumes in Asia were capped by public holidays in Japan, G20 discussions on plans to rebalance the world economy were read by traders as dollar negative there and this sentiment spilled over to Europe.
A document outlining the U.S. position ahead of the summit said exporters, which include China, Germany and Japan, should consume more, while debtors like the United States ought to boost savings.
"Without greater confidence that the U.S. recovery is robust, any pro-cyclical support for the dollar may be delayed," Simona Paravani, global investment strategist at HSBC Global Asset Management, said in a note to clients.
"The Federal Reserve is likely to err on the side of caution and keep rates low for longer than current forward money market rates suggest, another factor that counterbalances support from the recently more positive economic picture. We retain our neutral view on the dollar."
Government debt markets were weighed down by a fresh wave of new debt sales this week.
A substantial $112 billion in two-year, five-year and seven year U.S. notes is due to come on stream this week, with a record $43 billion two-year bond sale on Tuesday..
(Additional reporting by Atul Prakash)