* IMF inaction means emerging assets still in favor
* Stocks rise, dollar rebounds on profit taking
* U.S. bonds, Japan markets closed for holidays
(Updates U.S. markets close)
By Al Yoon
NEW YORK, Oct 11 (Reuters) - World stocks drifted slightly higher on Monday as investors bet on further asset buying by the U.S. Federal Reserve and a continuation of global currency flows toward emerging markets.
The dollar rebounded as profit-taking by dollar bears reversed the flow against the U.S. currency, weakened amid the rising expectations for Fed stimulus.
Finance policymakers meeting over the weekend in Washington produced no quick fix for global economic imbalances, providing no barriers to the cheap money trade of selling dollars to buy emerging market assets and commodities.
Reflecting this, MSCI's main emerging market stock index <.MSCIEF> climbed more than half a percent for a nearly 12 percent year-to-date gain. JPMorgan's EMBI+ index <11EMJ> showed investors snapping up emerging market government debt.
Both moves are continuations of massive flows into emerging markets in search of faster growth and higher yields than those available in developed economies.
EPFR Global said in its latest flow report at the end of last week that emerging market equity fund flows had hit a 33-month high and emerging bond funds had absorbed more than $1 billion in a week.
"It is increasingly being seen as the trade for all seasons," said David Shairp, global strategist at JPMorgan Asset Management.
Friday's U.S. jobs data, which was worse than expected, raised expectations the Fed will buy more assets under its quantitative easing (QE) program, essentially trying to pump up the ailing U.S. economy by printing more money.
This generally drives investments out of dollar assets and toward higher-yielding ones.
But Shairp reckons many in the markets also see the flow patterns continuing even if there is no new QE, with investors betting on higher growth abroad than in the U.S. economy.
At close in New York, the Dow Jones industrial average <.DJI> was up 2.11 points, or 0.02 percent, at 11,008.59, while the Standard & Poor's 500 Index <.SPX> was down 0.11 points, or 0.01 percent, at 1,165.04.
The Nasdaq Composite Index <.IXIC> was up 0.42 points, or 0.02 percent, at 2,402.33.
About 5.5 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq -- the lightest volume so far in 2010.
In Europe, the FTSEurofirst 300 <.FTEU3> gained 0.3 percent -- taking the year-to-date gain up to around 2.5 percent -- as traders anticipated the U.S. stimulus. The MSCI world equity index <.MIWD00000PUS> rose 0.13 percent.
"The market is clearly expecting quantitative easing and has priced that in," said Richard Lacaille, global chief investment officer at State Street in London. "The (U.S.) data continue to be as expected, part of a slow recovery."
Japanese markets and U.S. bond markets were closed for holidays.
Attention was also building on the upcoming corporate earnings reporting season.
Three Dow Jones index components -- Intel Corp
"I'm expecting a fairly decent earnings season, which will continue to build a base and show consistent growth. But the Fed will be the cause of greater volatility and price moves on a broader basis," Greco said.
Dow component Microsoft Corp
In currency markets, the dollar rose against a basket of major currencies <.DXY> as traders booked gains on long-time bearish bets.
Graphics on the global currency trade:
http://r.reuters.com/gez77p
http://r.reuters.com/jec96p
The dollar and equities have been inversely correlated as investors leave the perceived safety of the greenback to put money into equities. For details, see [ID:nN11137639]
"We've seen it for a while, since mid-September, the dollar sliding in value on the high likelihood that we will see more quantitative easing coming out of the Fed," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.
"And we will continue to see that expectation until the Fed actually does something and states that they are done, at least, for the time being."
The euro
The dollar earlier sank as low as 81.36 yen, triggering another round of speculation about possible intervention by Japan to weaken the yen.
In commodities, U.S. light sweet crude oil
(Additional reporting by Neal Armstrong and Brian Gorman in London, and Ryan Vlastelica in New York; Editing Andrew Hay)