* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
* Dollar heads for biggest fall in year on Trump woes
* U.S. stocks up in morning trading
* Oil set for second week of gains on output curbs (Updates with early U.S. markets' activity)
By Caroline Valetkevitch
NEW YORK, May 19 (Reuters) - The U.S. dollar fell and was poised for its worst week in more than a year while world stock markets edged up on Friday amid some calm following declines earlier in the week spurred by uncertainty relating to Donald Trump's U.S. presidency.
On Wall Street, key stock indexes climbed, led by energy shares. The S&P energy index .SPNY was up 1.1 percent along with a jump in oil prices. U.S. dollar .DXY slipped 0.7 percent on Friday and was down about 2 percent for the week, its worst week since April 2016. Besides worries surrounding Trump, the U.S. currency has suffered from a resurgent euro, which has gained more than 2 percent this week. dollar overall, across the board, has been getting beat up this week and a lot of that has to do with the political risk here in DC," said John Doyle, director of markets at Tempus Inc in Washington. "While we saw a little bit of a reprieve yesterday, we're right back on that dollar weakness train."
It has been the most eventful week of the year so far for investors, with leading world equity markets scaling record highs and then plunging in one of the sharpest cross-asset routs in years.
Triggering the move was uproar over Trump's firing of FBI director James Comey and allegations he pressed Comey to stop investigating his former national security chief and other officials' alleged ties with Russia. Investors have been concerned the allegations could delay tax cuts and increased spending, pro-growth efforts touted by Trump during his election campaign.
There was also been worry that any political damage could hamper Trump's chances of getting his promised fiscal stimulus - which has spurred markets higher since November - through Congress.
The Dow Jones Industrial Average .DJI was up 115.62 points, or 0.56 percent, AT 20,778.64, the S&P 500 .SPX gained 17.23 points, or 0.73 percent, to 2,382.95 and the Nasdaq Composite .IXIC added 42.85 points, or 0.71 percent, to 6,097.98.
The U.S. yield curve slumped during the week to levels not seen since Trump's election, and the probability given by markets of the Fed raising rates next month has tumbled to below 60 percent from over 90 percent last week.
U.S. Treasury yields rose slightly on Friday as stocks recovered, but yields stayed near one-month lows. 10-year notes US10YT=RR were last down 3/32 in price to yield 2.24 percent, up from 2.23 percent late on Thursday. The yields had fallen to 2.18 percent on Thursday, their lowest since April 19.
Emerging markets have been grappling with an unfolding corruption scandal in Brazil that threatens to engulf its president, Michel Temer.
After cratering on Thursday amid allegations Temer approved hush-money payment to the jailed former house speaker, Brazilian markets recovered on Friday.
On Thursday, the index and real tumbled as fresh accusations against Temer dampened the outlook for his structural reform plans.
In commodities, safe-haven gold was on track for its best week in five as the dollar softened. Spot gold XAU= was up 0.5 percent at $1,253.31 per ounce, as of 1358 GMT, putting it up 1.9 percent for the week. prices were heading for a second week of gains. Expectations increased that big crude exporters will extend output cuts to curb an inventory glut. crude LCOc1 was up 2 percent at $53.58, while U.S. benchmark crude oil CLc1 surged 2 percent to $50.34.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
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