* Dollar index up from lowest since January 2015
* U.S. stocks rise; European stocks close higher
* Gasoline futures soar as refineries shut (Updates to afternoon U.S. trading)
By Saqib Iqbal Ahmed
NEW YORK, Aug 30 (Reuters) - U.S. stocks, the dollar and U.S. Treasury yields rose on Wednesday after economic data indicated solid momentum, keeping alive the prospect of a U.S. interest rate increase in December.
Gasoline futures surged and crude oil prices fell as flooding and damage from Tropical Storm Harvey shut nearly a quarter of U.S. refinery capacity, curbing demand for crude while raising the risk of fuel shortages.
Gross domestic product data on Wednesday showed the U.S. economy grew faster than initially thought in the second quarter, while a separate report showed U.S. private-sector employers added 237,000 jobs in August, the biggest monthly increase in five months.
"The second-quarter GDP revisions were strong, and when coupled with the first-quarter revisions, the overall level seems relatively impressive for the first half of the year," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York.
On Wall Street, stocks gained as the unexpectedly strong U.S. economic growth data outweighed concerns about escalating tensions between the United States and North Korea.
Investors also awaited President Donald Trump's first speech specifically on tax reforms, a key contributor to the rally in stocks since his victory in November.
"Tax reform has been one of the biggest reasons for the rally and I think it is going to go through," said Ben Barzideh, wealth adviser at Piershale Financial Group.
The Dow Jones Industrial Average rose 43.75 points, or 0.2 percent, to 21,909.12, the S&P 500 gained 13.12 points, or 0.54 percent, to 2,459.42 and the Nasdaq Composite added 67.52 points, or 1.07 percent, to 6,369.41.
European stocks rose in a relief rally a day after geopolitical concerns caused a sharp dip across equity markets. The pan-European STOXX 600 closed 0.7 percent higher.
MSCI's world index, which tracks shares in 46 countries, was up 0.2 percent.
In the bond market, benchmark 10-year U.S. Treasury notes were down 3/32 in price to yield 2.15 percent, up from 2.14 percent on Tuesday.
Concerns about rising tensions with North Korea, and risks surrounding the U.S. government’s need to raise the debt ceiling next month, however, remained forefront in investors’ minds.
The dollar, which rose on speculation that the European Central Bank could step in to weaken the euro, also was helped by the strong data. The euro was 0.63 percent lower to $1.1897, on pace for its worst day in more than three weeks.
"People are starting to sit back and wonder: 'what is the ECB going to do about inflation still being below expectations in Europe?'," said Dean Popplewell, chief currency strategist at Oanda in Toronto.
The ECB is set to hold a policy meeting next week.
The dollar index, which measures the greenback against a basket of six major currencies, was 0.65 percent higher at 92.852.
The greenback briefly pared gains after Trump dismissed any diplomatic negotiations with Pyongyang, saying "talking is not the answer."
With Tropical Storm Harvey shutting over a fifth of U.S. refineries, U.S. gasoline futures were up 4.4 percent at $1.8624 a gallon, having hit $1.9231, the highest since July 2015.
Brent oil, the international benchmark for crude trading, was down $1.08 at $50.92 a barrel. U.S. crude was down 38 cents to $46.06.
Gold steadied as the stronger dollar pushed bullion off Tuesday's 9-1/2-month high, but it remained firmly above $1,300 an ounce on renewed tensions between Washington and North Korea.
Reporting by Saqib Iqbal Ahmed; Additional reporting by Karen Brettell and Sam Forgione in New York and Sruthi Shankar and Tanya Agrawal in Bengaluru; Editing by Chizu Nomiyama and James Dalgleish