GLOBAL MARKETS-Wall St touches new high on rate view; dollar rises

* S&P 500, DJI at record intraday highs

* Dollar turns higher on fatter U.S. bond yields

* Oil eases away from $115 (Adds comments, DJI record and oil price decline)

By Michael Connor

NEW YORK (Frankfurt: HX6.F - news) , June 20 (Reuters) - Wall Street equities hit new highs on Friday, boosted by money managers convinced that U.S. policymakers will keep a lid on interest rates through 2016, while oil prices backed away from nine-month peaks triggered by worries about the turmoil in Iraq.

Prices of U.S. Treasuries steadied after early declines blamed on a weak government sale of inflation-linked bonds, and the dollar rose as investors chased higher U.S. bond yields.

The benchmark Standard & Poor's 500 index hit a third straight intraday high as it headed for a sixth day of gains, what would be its longest winning streak since mid-April. The Dow Jones industrial average also touched a new peak.

The Dow Jones industrial average rose 34.69 points, or 0.21 percent, to 16,956.15, the S&P 500 gained 2.12 points, or 0.11 percent, to 1,961.6, and the Nasdaq Composite dropped 1.12 points, or 0.03 percent, to 4,358.21.

"There continues to be this hope that the economy improves, that growth improves. But for the markets, a slow steady growth environment is pretty much nirvana," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Federal Reserve Chair Janet Yellen on Wednesday effectively cleared the way for more Wall Street gains by suggesting that interest rates will remain low through 2016, some of the top U.S. money managers told Reuters.

A continued rally could easily put the S&P 500 on track to surpass the 2,000 mark.

"What I have is a sweet combination of a self-sustaining, long-lasting economic expansion joined with a long-lasting monetary accommodation," said Steven Einhorn, vice chairman of Leon Cooperman's hedge fund Omega Advisors Inc, which has $10.5 billion in assets under management.

Europe's major exchanges inched up, although the MSCI (NYSE: MSCI - news) index of world shares dipped 0.13 percent from record highs reached on Thursday.

U.S. Treasuries' yields rose during early trading in part on follow-through from Thursday's weak sale of 30-year Treasury inflation-protected securities.

Some traders saw the Fed growing more tolerant of price inflation, which suggests a later return to increased interest rates than has been generally expected.

Benchmark 10-year notes were flat in early afternoon, with the yield unchanged at 2.62 percent, after yields earlier rose as high as 2.659 percent.

"There's the thought that maybe they will let inflation run a little bit higher and not raise rates," said Dan Mulholland, managing director in Treasuries trading at BNY Mellon in New York.

The higher yields helped the dollar, with the dollar index up 0.16 percent at 80.444. Against the yen, the dollar was last up 0.2 percent, at 102.12 yen, while the euro slipped 0.17 percent to $1.3585.

Brent oil prices backed away from a nine-month peak as concerns that violence in Iraq, OPEC's second-largest producer, might lead to supply disruptions. Brent dropped 42 cents to $114.66 from a high of $115.71 touched on Thursday. U.S. oil added 75 cents to $107.18. (Reporting by Michael Connor in New York; Editing by Dan Grebler and Leslie Adler)