World stocks edged closer to a 17-1/2 month peak on Tuesday as a weak dollar-inspired rally in commodities and evidence of a recovery in US consumption spurred buying in risky assets.

The dollar fell to its lowest in almost a week against a basket of currencies, hit in part by a rising euro after Greece managed to raise 5 billion euros from the debt market on Monday.

Oil rose above $82 a barrel while mining shares rose broadly in Europe.

Firmer energy and mining shares also supported Wall Street, which also took heart from data showing US consumer spending rose for a fifth straight month. Spending normally accounts for about 70 per cent of US economic activity.

'Risk tolerance seems to be improving gradually, given firm stocks and commodity prices as well as a temporary easing of concerns about Greece,' said Tomohiro Nishida, treasury department manager at Chuo Mitsui Trust and Banking in Tokyo.

MSCI world equity index rose 0.4 per cent to its highest since early January. Just a few points more rise in the index will bring it to levels seen just after the collapse of Lehman Brothers in September 2008. The index, however, has risen only 3 percent this year.

The FTSEurofirst 300 index rose a quarter point while emerging stocks gained 0.6 per cent. US crude oil rose half a percent to $82.57 a barrel.

German government bond futures fell 11 ticks. Although Greece managed to sell its 7-year bonds on Monday, demand was subdued ahead of the Easter holiday in the first test of investor appetite since last week's EU-backed debt support deal.

Order levels on the new bond stood at around 7 billion euros compared with more than 16 billion euros in interest shown for a benchmark 10-year issue, whose success in early March had eased some of the nerves over Greece's financing.

The premium investors demand for holding 10-year Greek benchmark bonds rather than Germany's widened 6 basis points on the day to 327 bps.

'With the support of the EU Greece was able to issue a 7-year bond yesterday,' BNP Paribas said in a note to clients, but added that subdued demand for the bond, 'following in the direct aftermath of the agreement on an aid package for Greece, is less than impressive and suggests that further issuing activity is likely to be far from easy.'

'Hence, the euro's corrective rebound of the past few days would appear fragile at best,' the BNP Paribas note added.

The dollar fell 0.3 per cent against a basket of major currencies while the euro rose 0.2 per cent to $1.3512. The Australian dollar rose to $0.9192, helped by higher commodity prices and growing talk of an interest rate hike.-Reuters