* World FX rates in 2017 tmsnrt.rs/2egbfVh
* Dollar slips to 6-month low
* Oil lifted by expectations of continued supply cut
* Defense stocks lift Wall Street on U.S.-Saudi arms deal
* Gold, copper, zinc and nickel rise
* Treasury yields edge up as supply offsets political concerns (Adds Wall Street close; updates throughout)
By Hilary Russ
NEW YORK, May 22 (Reuters) - The dollar slipped to a more than six-month low on Monday, weighed down by an uncertain U.S. political climate, while oil prices rose on expectations that crude output cuts would continue and the euro surged.
Wall Street ended higher, lifted by technology stocks and by defense companies, which gained after U.S. President Donald Trump announced arms deals of up to $350 billion with Saudi Arabia over the weekend.
The euro hit a more than six-month high after German Chancellor Angela Merkel said it was "too weak" because of the European Central Bank's ultra-low interest rates and money printing program.
The dollar last week notched its largest weekly drop since April 2016 on concerns that turmoil in Washington could delay Trump's efforts to implement economic stimulus plans. Traders have also been reassessing their assumptions about the path of further Federal Reserve interest rate hikes this year.
"The dollar's broad declines are driven by the increasingly mixed tone to U.S. economic data, which has led to investors questioning the extent to which the Fed will be raising rates this year," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"The political climate is also acting as a key headwind for the dollar," he said.
Tracking the greenback against a basket of major currencies, the dollar index fell 0.19 percent, with the euro up 0.31 percent to $1.1239.
"The thing with euro/dollar is that you have quite a positive mood on the euro at the moment," said ABN Amro FX strategist Georgette Boele. "And when Merkel makes comments that the euro is probably too low, then this is taken as another positive reason to push it higher."
Sterling was also in the firing line, last trading at $1.2998, down 0.28 percent on the day, after polls showed Britain's election race tightening and the country's chief Brexit negotiator again threatened to walk away from EU exit talks unless the bloc eased its demands.
The Dow Jones Industrial Average rose 89.99 points, or 0.43 percent, to 20,894.83, the S&P 500 gained 12.29 points, or 0.52 percent, to 2,394.02 and the Nasdaq Composite added 49.92 points, or 0.82 percent, to 6,133.62.
Some European shares dipped, in part on political concerns in Spain after its Socialists on Sunday chose former leader and hardliner Pedro Sanchez to once again head the party.
The pan-European FTSEurofirst 300 index lost 0.11 percent and MSCI's gauge of stocks across the globe gained 0.54 percent.
Oil prices hit their highest in more than a month on growing confidence that the Organization of the Petroleum Exporting Countries and other producers would agree this week to extend supply cuts.
U.S. crude rose 0.73 percent to $51.04 per barrel and Brent was last at $53.75, up 0.26 percent on the day.
U.S. Treasury yields were marginally higher as light selling tied to this week's government and corporate bond supply offset safe-haven bids underpinned by worries about investigations of possible links between Trump's campaign officials and Russia.
The yield on benchmark 10-year notes was last at 2.252 percent.
Spot gold added 0.4 percent to $1,260.41 an ounce. U.S. gold futures gained 0.55 percent to $1,260.50 an ounce.
Copper rose 0.63 percent to $5,718.00 a tonne, while zinc and nickel prices touched two-week highs after China launched a regional crackdown on the steel industry, including production of the two metals. (Additional reporting by Patrick Graham, Ritvik Carvalho and Zandi Shabalala in London; Tanya Agrawal in Bengaluru; Danilo Masoni in Milan; Richard Leong, Saqib Iqbal Ahmed and Scott DiSavino in New York; Editing by Meredith Mazzilli and Dan Grebler)