* MSCI World Index posts worst two weeks since June
* Dollar touches 5-year high vs yen, gains versus euro
* Investors focus on Fed meeting next week
By Wanfeng Zhou
NEW YORK, Dec 13 (Reuters) - The U.S. dollar hovered near a five-year high against the yen and rose against the euro on Friday, while global equity indexes slipped on growing concerns the U.S. Federal Reserve could surprise investors by scaling back its stimulus as early as next week.
Stronger-than-expected U.S. data and a budget deal in Washington have brightened the outlook for the U.S. economy but are causing jitters in equity markets, which have benefited from ample central bank liquidity. The current Thomson Reuters consensus among economists is still for the Fed to begin withdrawing stimulus in March.
"There's a lot of uncertainty going into the (Fed) meeting and some are talking about a small taper next week, although that is not our view. We still think the Fed will wait until January to make any announcement," said Greg Moore, currency strategist at TD Securities in Toronto.
The Fed will hold its last policy meeting of the year on Tuesday and Wednesday.
Concerns about a possible Fed surprise next week resulted in U.S.-based funds pulling $6.51 billion out of stock mutual funds in the past week, the biggest outflow this year, according to Thomson Reuters Lipper data released on Thursday.
The MSCI world equity index was down 0.07 percent at 391.89, taking its losses for the past two weeks to 2.49 percent, the biggest fortnightly loss since June.
The prospect of Fed tapering boosted the dollar, with the euro falling 0.1 percent to $1.3738.
The dollar slipped against the yen after earlier hitting five-year highs. It last traded at 103.17 yen, down 0.2 percent on the day.
U.S. stocks ended little changed on Friday after a three-day drop but logged their worst week in nearly four months.
The Dow Jones industrial average was up 15.93 points, or 0.10 percent, at 15,755.36. The Standard & Poor's 500 Index dropped 0.18 point, or 0.01 percent, to 1,775.32. The Nasdaq Composite Index rose 2.57 points, or 0.06 percent, to 4,000.98.
The pan-European FTSEurofirst 300 touched two-month lows and ended down 0.1 percent at 1243.47 points.
Emerging markets were also hit, with sell-offs in currencies - including the Indonesian rupiah and the Indian rupee - on concern that tighter Fed policy could sap flows to emerging markets.
"We have taken down our exposure to some of the smaller markets, as the tapering can be a hassle for some emerging-market currencies," said Hans Peterson, the global head of investment strategy at SEB Private Banking.
Given the scale of the market moves in anticipation of the Fed meeting, some analysts said a rebound in equities was possible once the meeting is over, whether the Fed acts or not.
"I think either way we can get a relief rally post the Fed, because either we will get a very small taper and really strong guidance on rates, or we will get no taper," said Alan Higgins, chief investment officer, UK, at Coutts.
Expectations for Fed tapering and prospects for oil ports in eastern Libya to resume exports pressured oil prices.
January Brent gained 16 cents to settle at $108.83 a barrel in seesaw trading, following a fall of more than $1 on Thursday.
U.S. crude futures for January fell 90 cents to settle at $96.60 a barrel, after rising around $6 in the past two weeks.
Gold rose about 1 percent to $1,237 an ounce after a two-day fall, but sentiment remained fragile.
Benchmark U.S. 10-year Treasury notes last traded up 3/32 in price to yield 2.8664 percent, after data showed muted inflation pressures, reviving hopes the Federal Reserve will not reduce its bond purchase stimulus program next week.
Two-year German yields hit a three-month high as banks repaid the highest weekly amount since February to the European Central Bank.