* US dollar down to lowest since early September

* Fed minutes, European PMIs, Nvidia results out this week

* Japanese equities touch highs since 1990s

NEW YORK/SYDNEY, Nov 20 (Reuters) - The U.S. dollar dropped to its lowest in more than two months on Monday on expectations that U.S. interest rates have peaked, as global equities rose.

Closely watched U.S. treasury yields slipped after auction, while global oil futures gained $2 on the prospect of supply cuts.

The MSCI World Equity Index gained 0.72% by 2:41 p.m. EST (1941 GMT).

Europe's benchmark STOXX index inched up 0.1%, with energy stocks leading gains. The healthcare sector fell after shares in Bayer dropped to their lowest in 14 years.

On Wall Street, the Nasdaq led gains as shares of Microsoft hit record highs. The tech-heavy index rose 1.09% to 14,279.87, the Dow Jones gained 0.62% to 35,163.86 and the S&P 500 index advanced 0.76% to 4,548.22.

The dollar index fell to 103.26, its weakest since the start of September, as investors appeared to solidify bets that the Fed could start cutting interest rates next year.

Japanese shares hit highs not seen since 1990, thanks to strong earnings and offshore demand that fueled a three-week winning streak. The Nikkei ran into profit taking but was still up 8.2% for the month so far with the Topix not far behind.

Trading was expected to be muted for much of the week ahead of Thursday's U.S. Thanksgiving holiday. Black Friday sales will test the pulse of the consumer-driven U.S. economy this week.

"The historical pattern over the last five years suggests the shortened holiday week typically enjoys modest gains," said Quincy Krosby, chief global strategist for LPL Financial.

"With concerns over the resiliency of consumer spending, however, the market can be affected by any indication that Black Friday doesn't witness the throngs of consumers out hunting for bargains, or indications that the start to Cyber Monday won't result in the billions of dollars that are spent online," Krosby added.

Minutes of the Fed's last meeting will offer some color on policy makers' thinking as they held rates steady for a second time.

"Dovish minutes could trigger some downside risk for the dollar," Ricardo Evangelista, senior analyst at ActivTrades, said.

Signs of progress in the battle against inflation in the United States have driven a recovery in stocks this year as investors hope for an end to the cycle of rate hikes that have been policymakers' main tool for fighting price increases on goods.

"We expect the mega-cap tech stocks will continue to outperform given their superior expected sales growth, margins, re-investment ratios, and balance sheet strength," Goldman Sachs analysts said in a note. "But the risk/reward profile is not especially compelling given elevated expectations."

Tech major Nvidia reports quarterly results on Tuesday, and all eyes will be on the state of demand for its AI-related products.

A LOT PRICED IN

Markets have all but priced out the risk of a further U.S. rate hike in December or next year.

The yield on benchmark 10-year Treasury notes rose to 4.4237% compared with its Friday's close of 4.441%.

There was relief in Europe for some battered sovereign names, as the risk premia investors ask to hold Italian and Portuguese debt fell after ratings agency Moody's upgraded its view of the two countries.

It upgraded the outlook for Italy from negative to stable, and pushed Portugal's long-term issuer rating up two notches to A3 from Baa2, narrowing the spreads on both bonds relative to the region's benchmark German 10-year bonds.

Closely watched surveys of European manufacturing are due this week. Any hint of weakness will encourage more wagers on early rate cuts from the European Central Bank.

"These surveys will be very important around the euro area services sector given the sharp deterioration seen recently," NAB analysts said.

Markets imply around a 70% chance of an easing as soon as April, even though many ECB officials are still talking of the need to keep policy tight.

Sweden's central bank meets this week and may hike again, given high inflation and the weakness of its currency.

In commodities, oil rose amid speculation OPEC+ will extend, or increase, its production cuts at a meeting on Nov. 26.

Brent crude rose 2.18% to $82.37 barrel, as U.S. crude added 2.12% to $77.50.

Gold futures settled down 0.22% at $1,980.30 an ounce. Spot prices fell 0.12% to $1,977.73

(Reporting by Chris Prentice in New York, Wayne Cole in Sydney and Lawrence White in London; Editing by Lincoln Feast, Susan Fenton, Will Dunham, Sharon Singleton and Andrew Heavens)