* Wall St closes higher on economy bets; Brexit fear ebbs
* Sterling retreats from 5 1/2-month high vs dollar
* European stocks extend Monday's gains
* Brexit vote, Yellen testimony keep investors cautious
* Brent crude oil dips briefly below $50 a barrel (Updates to U.S. close)
By Edward Krudy
NEW YORK, June 21 (Reuters) - 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 remains 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 briefly dropped back below $50 per barrel and ended a two-day rally as the latest opinion polls indicated Thursday's referendum could go either way. But gold and the yen, safe-haven assets that often rally when investors are uncertain, continued to head lower.
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. has really dominated everything for the past several weeks," said Richard Gilhooly, head of rates strategy, at CIBC World Markets in New York. "The shift in the Fed's stance and forecasts have nothing to do with Brexit. There is something problematic with productivity and long-term growth as some economists have suggested."
The dollar strengthened against a basket of major currencies .DXY , mainly due to a 0.9 percent surge against the yen, which has retreated this week on indications the campaign for Britain to stay in the EU has regained momentum.
The Dow Jones industrial average .DJI rose 24.86 points, or 0.14 percent, to 17,829.73, the S&P 500 .SPX gained 5.65 points, or 0.27 percent, to 2,088.9 and the Nasdaq Composite .IXIC added 6.55 points, or 0.14 percent, to 4,843.76. MSCI's all-country world stock index .MIWD00000PUS edged up 0.2 percent after surging 1.7 percent on Monday. Europe, shares continued to drive higher. The pan-European FTSEurofirst 300 index .FTEU3 added 0.7 percent after gaining 3.7 percent on Monday. Britain's blue-chip FTSE 100 index .FTSE edged up 0.4 percent. 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 settled at $50.62 a barrel, just down from Monday, after dipping below $50 earlier in the session. It passed above $50 on Monday for the first time in a week. 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.
EUROZONE UNCERTAINTY HIGH
Euro zone growth is gaining momentum but uncertainty is high and the inflation outlook is subdued, ECB President Mario Draghi said Tuesday, indicating the European Central Bank stands ready to act if necessary.
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 those gains to trade down 0.5 percent at $1.4620.
The pound gained 0.5 percent to 153.31 yen GBPJPY= . The Japanese currency, which is often sought by investors in times of market uncertainty, also fell 0.9 percent to 104.86 per dollar JPY= .
U.S. Treasury yields rose to one-and-a-half week highs. Benchmark 10-year notes US10YT=RR were last down 10/32 in price to yield 1.704 percent, up from 1.670 percent late on Monday. another "safe haven" where investors park their money at times of heightened risk, fell 2 percent XAU= to $1,264.88 an ounce, with traders citing the reduction in the risk that the United Kingdom will leaver the EU.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 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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