* U.S. stocks rally as later Fed rate hike seen
* Treasury yields dip, oil slips
* Dollar falls to 4-month low, then cuts losses (Updates to U.S. midday)
By Caroline Valetkevitch
NEW YORK, May 14 (Reuters) - Increasing expectations the U.S. Federal Reserve will hold off raising interest rates until September at the earliest boosted Wall Street on Thursday and drove the dollar to near its lowest level since January.
U.S. data showed recent strength in the dollar and lower oil prices suppressed producer price inflation in April, supporting the view the Federal Reserve will probably not raise rates until later in the year.
"People are pretty focused on the weak numbers for the U.S.," said David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut. "People are increasingly wondering if the Fed is going to be ready to begin raising rates in September."
With a rise in U.S. interest rates seeming more distant, some investors sold long dollar positions.
The dollar index, which measures the greenback against a basket of six major currencies, was trading just slightly lower after paring earlier losses..
Wall Street gained as the dollar slipped, offering respite to U.S. multinationals.
"A lot of people are looking at the data as non-inflationary, which leads them to believe that the Fed might delay raising rates," said Jeff Powell, chief investment officer of Polaris Wealth Advisers in San Francisco.
A separate report showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
The Dow Jones industrial average rose 151.18 points, or 0.84 percent, to 18,211.67, the S&P 500 gained 15.18 points, or 0.72 percent, to 2,113.66 and the Nasdaq Composite added 47.69 points, or 0.96 percent, to 5,029.38.
MSCI's all-country world index of the stock market performance in 46 countries was up 0.5 percent.
U.S. Treasury yields fell as some corporate debt issuance that has weighed on the market passed. German government bonds held relatively steady, after a dramatic two-and-a-half week selloff. [US:nL1N0Y513D]
Benchmark 10-year note yields fell to 2.25 percent from 2.27 percent late on Wednesday.
Investors were keeping a close eye on developments in Greece, which on Thursday offered a concession to international lenders by pushing ahead with the sale of its biggest port.
In commodity markets, oil slipped back below $67 a barrel as a market torn between a U.S. stock draw and a global glut of crude struggled for direction. U.S. crude futures were down 47 cents at $60.03 a barrel, while Brent was down 6 cents at $66.75. (Additional reporting by Sam Forgione in New York, Tanya Agrawal,Jamie McGeever in London and Sudip Kar-Gupta; Editing by Bernadette Baum and Nick Zieminski)