* Weaker-than-expected U.S. data knocks dollar
* Treasury prices fall ahead of Fed
* Weaker dollar helps lift oil
* Sterling gains on reduced Brexit chances (New throughout, changes dateline, previous LONDON)
By Dion Rabouin
NEW YOEK, April 26 (Reuters) - The dollar sank on Tuesday after weaker-than-expected U.S. economic data boosted expectations the Federal Reserve would hold interest rates lower for longer, while U.S. Treasury yields touched five-week highs as traders positioned ahead of the central bank's policy statement.
U.S. durable goods orders rebounded less than expected in March and a survey of American consumer confidence missed expectations, adding to a slew of weak data on the U.S. economy in the first quarter. economic data "plays into the idea that the Fed need not be in any rush to raise rates," said Richard Franulovich, senior currency strategist at Westpac Banking Corporation in New York.
Fed funds futures rates showed investors see no chance the Fed will raise benchmark U.S. interest rates above the current rate of 0.25 percent to 0.5 percent on Wednesday, and Tuesday's weaker-than-expected data pushed back odds of any rate hike in 2016, analysts said.
"It is pretty much a given that the FOMC won't raise rates at this meeting, and may not raise rates until the end of the year," said Kevin Giddis, head of fixed income capital markets at Raymond James in Memphis, Tennessee.
Markets see a 23 percent chance of interest rates rising in June, according to CME Group's FedWatch.
The U.S. dollar index .DXY , which measures the dollar against a basket of six major currencies, fell 0.45 percent to 94.458.
U.S. benchmark 10-year Treasury notes US10YT=RR slipped 7/32 in price to yield 1.925 percent, the highest level since March 23.
World stocks were mixed, with Wall Street edging lower as investors assessed quarterly earnings and awaited the outcome of the Fed meeting. Dow Jones industrial average .DJI fell 14.45 points, or 0.08 percent, to 17,962.79, the S&P 500 .SPX gained 1.52 points, or 0.07 percent, to 2,089.31 and the Nasdaq Composite .IXIC dropped 9.39 points, or 0.19 percent, to 4,886.40.
European bourses edged higher, boosted by a smaller-than-expected 80 percent first-quarter profit fall and unchanged dividend from BP BP.L , as well as encouraging results from pulp and paper maker UPM UPM1V.HE markets indexes .MSCIEF rose along with Chinese stocks .CSI300 , while Japan's Nikkei .N225 was lower on the day.
The yen was flat JPY= , as investors weighed prospects of more monetary stimulus this week from the Bank of Japan, which begins a two-day meeting on Wednesday.
Late last week, the Japanese currency tumbled to three-week lows on speculation the BOJ would introduce more easing measures, but analysts said those expecting aggressive monetary loosening may be disappointed.
Sterling strengthened to a 10-week high against the dollar GBP=D4 , building on Monday's gains as investors bet more heavily that Britons would vote to stay in the European Union at a referendum in June, following a weekend visit from U.S. President Barack Obama who urged Britain to remain in the European Union. GBP/
"It looks as if there has been a change of sentiment," said Esther Reichelt, an FX strategist with Commerzbank (DE:CBKG) in Frankfurt. "The options market in general is pricing in less chance of a big move around the Brexit vote and the market seems less worried it will happen."
The weaker dollar and expectations that the global oil glut would ease lifted oil prices.
Brent futures LCOc1 traded up 1.4 percent at $45.10, while U.S. crude futures CLc1 gained 57 cents at $43.21 a barrel. O/R
Both remained near five-month highs touched last week.