* Stocks surge as Yellen says will follow Bernanke's path
* Dollar rises, oil prices steady on Yellen's congressional remarks
* Gold hits three-month high, U.S. government debt sells off
By Herbert Lash
NEW YORK, Feb 11 The dollar rose and global equity markets rallied on Tuesday after Federal Reserve Chair Janet Yellen said she expects the U.S. central bank to continue trimming its bond purchases, a sign the Fed believes the economy is on track to grow further.
Stock indexes on Wall Street surged 1 percent or more, while the U.S. currency rebounded against the euro and gained against the yen after Yellen's testimony before the House Financial Services Committee.
A potential market headwind also could be removed after Republican leaders in the U.S. House of Representatives agreed to vote on legislation that extends Washington's borrowing authority for a year without conditions.
A vote scheduled for Tuesday night would mark a dramatic shift from the confrontational fiscal tactics House Republicans have used over the past three years, culminating in last October's 16-day shutdown of the federal government.
Yellen said recent volatility in global financial markets did "not pose a substantial risk to the U.S. economic outlook" and reiterated that the Fed was on track to keep scaling back its economic stimulus.
The benchmark S&P 500 posted its best four-day performance in 13 months, gaining 3.9 percent over the period, and was within 1.7 percentage points of its all-time high reached a month ago.
Stocks in Canada, Europe and emerging markets also rallied as Yellen emphasized continuity in the Fed's policy, saying she strongly supports the path of her predecessor, Ben Bernanke.
"The last thing she wants to do at this point is complicate things or muddy a well-established message. 'Do no harm' is her motto unless the data changes more than we have seen so far," said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.
MSCI's all-country world index, which measures stock performance in 45 countries, rose 1.02 percent and its emerging markets index gained 1.1 percent.
In Europe, the FTSEurofirst 300 index of leading regional shares closed up 1.25 percent, while stock markets in Brazil and Mexico jumped more than 1.5 percent. Shares on Bay Street in Toronto rose 0.63 percent.
On Wall Street, the Dow Jones industrial average rose 192.98 points, or 1.22 percent, to 15,994.77. The S&P 500 gained 19.91 points, or 1.11 percent, to 1,819.75 and the Nasdaq Composite added 42.871 points, or 1.03 percent, to 4,191.045.
"'Stay the course' is in my opinion the message the Street wanted to hear," said Phil Orlando, chief equity strategist at Federated Investors in New York. "The Fed believes these weather issues, these (emerging market) issues are transitory and we are in a sustainable growth path for U.S. GDP."
The dollar came off nearly two-week lows after Yellen signaled there would no immediate deviation from the Fed's winding down of its massive bond purchases.
The U.S. currency jumped 0.36 percent against the Japanese yen to 102.61, while the euro fell 0.05 percent to 1.3637 against the dollar.
U.S. Treasuries slid after Yellen said she strongly supported the Fed's monetary policy strategy, suggesting its current reduction in bond purchases was on track. Her remarks dispelled fears the economy was worse than expected.
The interest rate on U.S. one-month Treasury bills fell to the lowest in over a week on signs of progress to raise the federal debt ceiling. Such a move would avert the government delaying payments on its debt.
The price of benchmark 10-year Treasury notes fell 13/32, to yield 2.7259 percent.
Gold hit a three-month high and oil prices rose, with Brent crude edging above $109 a barrel.
Brent crude rose 5 cents to settle at $108.68 a barrel. U.S. crude edged down 12 cents to settle at $99.94.
U.S. COMEX gold futures for April delivery settled up $15.10 an ounce at $1,289.80.