GLOBAL MARKETS-Oil hits record near $120, U.S. stocks rise

(Recasts with U.S. markets, adds byline; changes dateline; previous LONDON)

By Herbert Lash

NEW YORK, April 28 (Reuters) - Oil hit a record near $120 a barrel and U.S. stocks edged higher on Monday, boosted by energy stocks and optimism over a proposed $23 billion takeover of chewing gum icon Wm Wrigley Jr Co WWY.N.

A recent rally in the dollar stalled as investors bought euros to square up positions ahead of a key U.S. interest rate decision later this week when Federal Reserve policy-makers meet.

Oil prices retreated from early peaks as the dollar slipped against the euro, reflecting rising but still minor speculation that the Fed may not cut interest rates this week.

Another Fed rate cut would further erode an already weak dollar and likely fuel higher prices, especially of dollar-denominated commodities. But if the Fed holds the line on further rate cuts that could cause oil prices to drop.

The two-day meeting starting on Tuesday of the Federal Reserve Open Market Committee has taken on greater importance because the decision is not as clear-cut as the recent past.

"The market is holding its breath ahead of the Fed tomorrow," said Matthew Strauss, senior currency strategist, at RBC Capital Markets in Toronto. "For the first time in a number of FOMC meetings, there is significant uncertainty about the decision and the statement."

The uncertainty over the Fed's move tempered the mood on Wall Street. But the proposed $23 billion acquisition of Wrigley by M&M's candy maker Mars Inc and billionaire investor Warren Buffett and an investor's bid to increase a stake in Ford Motor Co (F.N: Quote, Profile, Research) showed investors were still willing to put money in areas that held promise.