* Yellen warns of waiting too long to raise rates
* Record-setting Wall Street sets tone
* Dollar on its best run since May 2012
By Jamie McGeever
LONDON, Feb 15 (Reuters) - World stocks hit 21-month peaks on Wednesday and the dollar rose for the 11th straight day, after Federal Reserve Chair Janet Yellen flagged a possible interest rate rise next month during upbeat comments on the U.S. economy.
The dollar notched up its longest winning streak in almost five years after Yellen said on Tuesday the Fed would probably need to raise rates at an upcoming meeting and that delaying could leave the central bank's policymaking committee behind the curve.
Propelled by record highs on Wall Street, MSCI's benchmark global equity index rose 0.25 percent to 442.4 points , its highest since May 2015 and two points off its record high. It has not fallen for six sessions, its longest such run since last July.
Europe's index of leading 300 stocks rose 0.4 percent to 1,465 points, its highest since December 2015. Germany's DAX and Britain's FTSE were both up 0.5 percent.
"At the margin, you could say that her (Yellen's) comments were probably tilted slightly towards to the hawkish side given her upbeat comments around the economic outlook," said Jim Reid, markets strategist at Deutsche Bank.
Yellen's remarks helped push Wall Street by boosting U.S. bank stocks. Goldman Sachs shares hit a record high, and are up 37 percent since the U.S. presidential election on Nov. 8.
Financials also led the way in Europe, with Credit Agricole up more than 3 percent after France's biggest retail bank beat forecasts with a smaller than expected earnings drop in the fourth quarter.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7 percent, rising to its highest since July 2015. Japan's Nikkei added more than 1 percent, buoyed by a weaker yen.
The dollar index against a basket of major currencies chalked up its longest winning streak since May 2015. It was up 0.2 percent at 101.220, near a four-week high of 101.380 scaled overnight.
Yellen's remarks rekindled expectations in some quarters for the Fed to raise rates three times in 2017 rather than twice. The futures market did not share this view amid doubts about the U.S. economy's ability to sustain three hikes.
According to CME Group's FedWatch data, U.S. interest rate futures implied an around 30 percent chance of at least three increases this year, little changed from the previous day - though the chance rose above 40 percent immediately after Yellen's comments.
"That kind of rate re-think is dollar-friendly, but too timid to derail the risk rally that starts in U.S. equities and spreads into emerging market currencies," said Kit Juckes, head of FX strategy at Societe Generale in London.
The greenback was a shade higher at 114.40 yen after rising to a two-week high of 114.50 the previous day, while the euro slipped to a one-month low of $1.05525.
The dollar was supported as U.S. Treasury yields rose on the Fed Chair's comments, with the benchmark 10-year yield climbing four basis points to an 11-day high of 2.50 percent the previous day. They were last at 2.475 percent.
The stronger dollar, which puts non-U.S. buyers of dollar-denominated commodities at a disadvantage, weighed on crude oil prices.
U.S. crude was down 0.5 percent at $52.91 a barrel and Brent shed 0.4 percent to $55.75 a barrel. Crude already came under pressure the previous day on evidence of surging U.S. stockpiles.
Spot gold was off 0.15 percent at $1,225.91 an ounce.
Copper on the London Metal Exchange rose to $6,068 a tonne but relinquished much of that rally to stand slightly higher on the day at $6,036. The metal has enjoyed support recently following a strike at the world's biggest copper mine in Chile that took it to a 1-1/2-year high above $6,200 a tonne on Monday.
Reporting by Jamie McGeever; editing by John Stonestreet