* Yen falls against dollar on BOJ report
* World stock indexes up slightly; S&P 500 edges lower
* Investors digest news on Italy elections
By Caroline Valetkevitch
NEW YORK, Feb 25 (Reuters) - The yen fell against the dollar on Monday on higher prospects of unprecedented monetary easing in Japan, while an index of world stocks pared gains as investors digested projections for the outcome of Italy’s weekend elections.
Pressuring stocks and the euro, a projection by Italian TV showed the centre-right party was leading elections for the Senate vote.
Earlier, stock and other investors cheered exit poll results from Italy’s weekend election that showed the centre-left, pro-reform Democratic Party was in the lead.
The outcome of the election is expected to hold the key to whether the current reform program will continue uninterrupted in the euro zone’s third-largest economy. A victory by the center-right coalition could cause instability in one of the euro zone’s largest economies as Italy copes with a deep recession and weak growth.
The MSCI world equity index was up 0.2 percent after three consecutive weekly losses as evidence of sluggish global growth mounted. Italy’s main FTSE MIB stock market index was up 0.7 percent after rising more than 3 percent earlier.
On Wall Street, the Dow Jones industrial average was unchanged at 14,000.57. The Standard & Poor’s 500 Index was up 0.78 point, or 0.05 percent, at 1,516.38. The Nasdaq Composite Index was up 8.31 points, or 0.26 percent, at 3,170.13.
In the foreign exchange market, the yen fell for a second straight session against the dollar on news that Japan’s prime minister is likely to nominate Asian Development Bank President Haruhiko Kuroda as the next central bank governor to step up his fight to finally rid the country of deflation.
The dollar shot up to 94.76 yen on Monday, a high not seen since May 2010. The U.S. currency last traded at 94.08 yen, up 0.7 percent on the day, according to Reuters data.
Japanese Prime Minister Shinzo Abe won a big election victory in December, promising to revive the fortunes of an economy stuck in the doldrums for most of the past two decades.
Abe’s repeated calls for more forceful central bank action are largely behind the currency’s nearly 20 percent fall against the dollar since November, when Abe began calling for bolder monetary easing.
“The news all but ensures that the BoJ will continue on an expansionary path of monetary easing to help kick-start the world’s number three economy,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, D.C.
“Consequently, the yen remains vulnerable to continued losses across the board,” he said.
The euro last traded at 123.74 yen, up 0.5 percent on the day, but sharply below the global session high of 125.25 yen, according to Reuters data.
The euro briefly traded flat after the latest poll and last traded at $1.3204, up 0.1 percent on the day on the day. That is far below the global session peak of $1.3318.
Investors also are looking ahead to testimony by Federal Reserve Chairman Ben Bernanke to Congress on Tuesday and Wednesday, in which he is expected to downplay the idea that the U.S. central bank could prematurely end its current massive monthly bond-buying program.
In the bond market, the benchmark 10-year U.S. Treasury note was up 6/32 in price, with the yield at 1.94 percent.