* Spain stocks, bonds rally as Catalonia fudges independence call
* World stocks hit record high, Asia at decade peak
* Japan's Nikkei at 21-month top, KOSPI at record highs
* Spain relief lifts euro, dollar limp around two-week lows
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Oct 11 (Reuters) - World stocks set a record high on Wednesday, as relief that Catalonia had put off any plans to break away from Spain followed a two-decade peak for Asia's biggest share market and more upbeat predictions for the global economy.
Spanish stocks and bonds rallied and the euro reached a two-week high in early European trading after Catalonia's leader, Carles Puigdemont, declined to make a formal declaration of independence on Tuesday. That disappointed many pro-independence supporters but pleased financial markets.
A 1.5 percent jump in Spain's IBEX helped MSCI's 47-country world stocks index touch a record high.
The biggest surge came from Spanish banks, which rallied as much as 4 percent. Spanish government bond yields - a gauge of political tension - saw their second-biggest decline in a month .
"There was a chance Puigdemont would have made a decisive declaration, so now yields are dropping because there is room for negotiation left," said DZ Bank strategist Christian Lenk.
The euro climbed as high as $1.18345 against the dollar, a two-week top. The U.S. currency was down for a fourth day running and on its worst run since July.
U.S. President Donald Trump's feud with Tennessee Senator Bob Corker, an influential fellow Republican, has raised concern that Trump's proposed tax-code overhaul would fail.
"Squabbles surrounding Trump's efforts come as no surprise, but it is still not helping the dollar," said Yukio Izhizuki, senior currency strategist at Daiwa Securities in Tokyo.
The early Spanish gains bolstered already-confident markets. The International Monetary Fund pushed up its forecasts for global growth on Tuesday, helping Wall Street to its latest record high.
Asian shares then climbed to their highest in a decade as Japan's Nikkei reached its strongest since 1996, despite more losses for scandal-hit Kobe Steel . South Korean stocks reached a new record top.
"A risk-on mood has set in and money is flowing out of bond funds into equities funds," said Hugh Dive, chief investment officer at Atlas Funds Management.
"One of the biggest drivers of global equities is the United States, and some of the macro data coming out from there has been quite positive. There is also this view that China is travelling much better than many people had expected."