* Sterling retreats from 5 1/2-month high vs dollar, up vs yen
* European stocks extend Monday's gains, Wall St edges up
* Brexit vote, Yellen testimony keep investors cautious
* Brent crude oil dips back below $50 a barrel (Updates with early U.S. market activity, changes dateline, previous LONDON)
By Edward Krudy
NEW YORK, June 21 (Reuters) - Global stock markets edged higher on Thursday while sterling reversed gains after hitting a more than 5 1/2-month high earlier in the day as polls and surveys showed the United Kingdom's vote on leaving the EU on a knife-edge.
Mixed trading across asset classes pointed to uneasiness in markets, investors said, and came after Monday's dramatic surge in "risk assets," driven by polls showing the chance of the United Kingdom leaving the EU appearing to lessen.
Oil prices fell nearly $1, dropping back below $50 per barrel and ending a two-day rally as the latest opinion polls indicated Thursday's referendum could go either way. But gold, a safe-haven asset, continued to head lower.
"All eyes are on that vote," said Ian Lyngen, a senior government bond strategist at CRT Capital in Stamford, Connecticut.
Fed Chair Janet Yellen said global risks and a U.S. hiring slowdown warrant a cautious approach to raising interest rates. Her comments before the Senate Banking Committee seemed to signal no pressing need for the Fed to raise rates. dollar strengthened against a basket of major currencies .DXY , surging 0.6 percent against the safe-haven yen, which has retreated this week on indications the campaign for Britain to stay in the EU has regained momentum.
The MSCI's all-country world stock index .MIWD00000PUS edged up 0.3 percent after surging 1.7 percent on Monday. Wall Street stocks as measured by the S&P 500 .SPX rose 0.3 percent, initially pairing some gains after Yellen's cautious outlook. pan-European FTSEurofirst 300 index .FTEU3 added 0.9 percent after surging 3.7 percent on Monday. Britain's blue-chip FTSE 100 index .FTSE edged up 0.6 percent.
Two opinion polls published on Monday put the "Remain" camp, those campaigning for the United Kingdom to stay in the EU ahead before Thursday's vote, but another gave "Leave" a slight lead. crude oil LCOc1 fell back below $50 a barrel, which it past on Monday for the first time in a week in a rally driven by polls that appeared to show the "Leave" campaigns momentum weakening. It last traded at $49.95.
Concern that Britain, the world's fifth-largest economy, will leave the EU has weighed on financial markets for weeks and has been cited by central bankers, including Yellen, as a major obstacle for the global economy.
Euro zone growth is gaining momentum but uncertainty is high and the inflation outlook is subdued so the European Central Bank stands ready to act if necessary, ECB President Mario Draghi said in comments on Tuesday.
Sterling, the main vehicle used by international investors to express a view on the referendum, rose as high as $1.4788 GBP , its strongest since early January, but gave up most of those gains to trade down 0.1 percent at $1.4681.
"I think we'll hop from poll to poll ... and you'd have thought that there will be another couple of wobbles before we're done," said Societe Generale (PA:SOGN) macro strategist Kit Juckes.
The pound gained 0.8 percent to 153.78 yen GBPJPY= . The Japanese currency, which is often sought by investors in times of market uncertainty, also fell 0.6 percent to 104.58 per dollar JPY= .
Yields on low risk U.S. Treasury yields fell slightly. Benchmark 10-year notes US10YT=RR were last yielding 1.68 percent, down from 1.69 percent earlier on Tuesday. The bonds closed on Monday with yields of 1.67 percent.
Gold, another "safe haven" where investors park their money at times of heightened risk, fell 1.5 percent XAU= to $1,270.91 an ounce on the reduction in Brexit risk.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Reuters' new Live Markets blog on European and UK stock markets
reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets Interactive Brexit graphic
http://tmsnrt.rs/1Ke31HF Asset performance in 2016
http://reut.rs/1WAiOSC Currencies in 2016
http://link.reuters.com/tak27s
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