* Sterling hits 5 1/2-month high against dollar, rises
versus yen
* European stocks extend Monday's big gains, Wall St seen
rising
* Brexit vote, Yellen testimony keep investors cautious
* Brent crude oil dips back below $50 a barrel
By Nigel Stephenson
LONDON, June 21 (Reuters) - Britain's pound hit a 5/12-month
high against the dollar and stocks rose on Tuesday as worries
diminished that Britons would vote to leave the European Union,
though polls and surveys showing the referendum on a knife-edge
kept investors nervous.
Two opinion polls published on Monday put the "Remain" camp
ahead before Thursday's vote but another gave "Leave" a slight
lead.
The dollar weakened against most major currencies with the
exception of the yen, which has retreated this week on
indications the campaign for Britain to stay in the EU has
regained momentum.
"Financial markets appear to be taking the view that the
race may well already be run, which given the twists and turns
seen already in this campaign may well be extremely far sighted,
or dangerously premature. With more polls due out later today we
can expect to see further volatility unfold in the event of a
move either way," said Michael Hewson, chief strategist at CMC
Markets in London.
Also keeping investors nervous was testimony due later in
the day from the European Central Bank chief Mario Draghi and
from U.S. Federal Reserve Chair Janet Yellen. Draghi speaks
before a European Parliament committee.
Yellen testifies before the Senate Banking Committee at the
same time and her remarks will be scoured for clues to the
timing of a possible rise in U.S. interest rates.
Concern Britain, the world's fifth-largest economy, will
leave the EU has weighed on financial markets for weeks and has
been cited by central bankers, including Yellen, as a major
obstacle for the global economy.
Britain's FTSE 100 .FTSE blue-chip share index, edged up
0.1 percent while the pan-European FTSEurofirst 300 stocks index
.FTEU3 was up 0.5 percent. Both indexes gained more than 3
percent on Monday.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
Asian shares rose. MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS was up 0.6 percent. Tokyo's
Nikkei 225 index .N225 rose 1.3 percent, buoyed by a weak yen.
Sterling, the main vehicle used by international investors
to express a view on the referendum, rose as high as $1.4788
GBP=D4 , its strongest since early January.
"I think we'll hop from poll to poll ... and you'd have
thought that there will be another couple of wobbles before
we're done," said Societe Generale (PA:SOGN) macro strategist Kit Juckes.
The pound gained 1 percent to 154.17 yen GBPJPY= . The
Japanese currency, which is often sought by investors in times
of market uncertainty, also fell 0.8 percent to 104.72 per
dollar JPY= .
CRUDE DIPS
Brent crude oil prices LCOc1 fell back below the $50 a
barrel they broke through on Monday for the first time in a week
on reduced expectations of a Brexit. It last traded at $49.97.
Yields on low-risk U.S. and German government bonds, which
rose on Monday, held steady. German 10-year yields DE10YT=TWEB
edged up to 0.071 percent, having fallen close to minus 0.04
percent last week when Brexit worries were at their most acute.
Germany's Constitutional Court rejected a challenge to the
ECB Outright Monetary Transactions (OMT) scheme, a never-used
bond-buying scheme. Limiting OMT could have dented confidence in
its ability to tackle crises.
Gold, another "safe haven" where investors park their money
at times of heightened risk, fell 1.5 percent XAU= to about
$1,270 an ounce on the reduction in Brexit risk.