Oil traded above $122 a barrel on Wednesday but global equity markets generally rose and the dollar climbed on waning fears about the credit crisis, reports Reuters.

The price of crude was at $122.09, just off its all-time high of $122.73 a barrel hit on Tuesday, held up by supply worries and pending US weekly inventory data.

Oil is up more than 8.5 percent this month and has gained 27 percent since the beginning of the year, raising worries about inflation and crimping the ability of central banks to fight a spreading economic slowdown. It has, however, yet to derail a global stock market rally that began in late March.

European shares were higher with the FTSEurofirst 300 gaining 0.2 percent. Japan's Nikkei .N225 rose 0.4 percent to a four-month closing high of 14,102.48.

The broader TOPIX index gained 1.2 percent to 1,393.28. "The market's mood has changed. We are past the worst, but it's too early to be fully optimistic," said Noritsugu Hirakawa, strategist at Okasan Securities. Emerging market shares, however, were weak, with Hong Kong's Hang Sen index down some 2.5 percent.

Wall Street closed higher overnight, boosted by reassurances from Fannie Mae, the largest US home finance company, about the credit and housing markets. Some investors urged caution, however.

"Everyone would like it to be over but these things don't just happen overnight," said Martin Angel, a dealer at Australia's Patersons Securities.

DOLLAR RISES

The dollar strengthened, heading towards a two-month high against a basket of currencies after comments from a Federal Reserve official added to a view that the cycle of aggressive US interest rate cuts may be ending.

Kansas City Fed President Thomas Hoenig said late on Tuesday that rates will need to be raised in a timely way as the central bank grapples with a serious threat of inflation, prodding the euro towards a five-week low versus the dollar. The euro slipped roughly 0.3 percent to the day's low around $1.5465.

The dollar rose more than 0.2 percent to 105.02 yen, nearing a two-month high around 105.70 yen touched on Friday. Euro zone government bonds were selling off amid oil-induced worries about inflation and the Fed comments.

The 10-year yield was up 5 basis points at 4.188 percent while the 2-year was up 3 basis at 3.812 percent.