* Dollar hits three-year low vs basket of currencies
* European stocks inch up, Wall Street set to follow suit
* US crude hits 2-1/2 year high then slides, gold at record
* Speculation that U.S. Q1 GDP will undercut forecasts
(Adds U.S. stock futures, Treasuries, extra detail)
By Mike Peacock
LONDON, April 28 The dollar slid to three-year
lows on Thursday and stocks firmed worldwide ahead of crucial
U.S. GDP data, with investors betting ultra-loose American
policy would continue to drive money into riskier assets.
The Federal Reserve said it would complete its $600 billion
bond-buying programme in June but Chairman Ben Bernanke
signalled it was in no rush to tighten monetary policy with the
jobs market still in a "very, very deep hole". [ID:nN26291565]
The Bank of Japan also maintained its rock-bottom policy
stance, moves that are likely to see both the dollar and yen
used as funding currencies to buy higher-yielding assets, such
as commodities and equities. [ID:nL3E7FR5BU]
"With the prospect of ultra easy monetary policy continuing
for the foreseeable future in the world's largest economy,
traders are feeling more confident about holding the bullish
view and risk appetite is expected to be high," said Jonathan
Sudaria, a dealer at Capital Spreads in London.
European shares gained 0.2 percent .FTEU3, with Deutsche
Bank (DBKGn.DE) up 4.5 percent after it beat forecasts with a
quarterly net profit at a near-record level.
World stocks as measured by the MSCI All-Country World Index
.MIWD00000PUS were up 0.7 percent by 1045 GMT, Japan's Nikkei
average .N225 rose 1.6 percent and U.S. stock futures
suggested Wall Street's rally has further to run. SPc1
"The markets will be reassured, though the punch bowl is
being replaced by a smaller punch bowl," Justin Urquhart
Stewart, director at Seven Investment Management, said of the
Fed's statement. "But with today's GDP figures expected to be
weaker, there will be a level of nervousness."
U.S. GDP data at 1230 GMT are expected to show growth slowed
to a 2 percent annualised rate or less in the first quarter,
from 3.1 in the last three months of 2010. [ID:nN27171497]
U.S. Treasury debt prices edged up in Europe supported by
some expectations that U.S. growth will fall short of even that
forecast, traders said. [US/]
Elsewhere in the debt markets, Greek government bond yields
gyrated but were expected to move higher as investors become
increasingly convinced a debt restructuring is looming. Two-year
yields GR2YT=TWEB fluctuated between 24 and 27.1 percent,
having shot up 2 percentage points on Wednesday. [GVD/EUR]
"There's no real turnaround in the sentiment ... If you're
talking about restructuring you really don't want to be there,"
one trader said.
Asset returns since first hints of QE2
BOJ balance sheet vs Fed link.reuters.com/saq88r
DOLLAR UNDER THE COSH
With the Fed's stance jarring with central banks in Europe,
Asia and Latin America already raising interest rates, the
dollar index .DXY, which tracks its performance against a
basket of major currencies, fell to as low as 72.871 -- a level
not seen since July 2008.
It last stood at 73.13, down 0.5 percent on the day.
A Reuters poll showed most U.S. primary dealers expect the
Fed to keep rates near zero through the end of 2011. [FED/R]
Dealers said several central banks in Asia were spotted
buying the greenback to check sharp gains in their currencies.
The euro rose to a 17-month high of $1.4882 EUR= before
easing a little, while the Australian dollar charted a new
29-year high near $1.0948 AUD=D4.
"It's obviously pretty much open water here until $1.50,"
Rob Ryan, FX strategist at BNP Paribas in Singapore, said of the
euro, adding that the Aussie dollar could try for $1.10.
In commodities markets, dollar weakness helped propel U.S.
crude CLc1 to a 2-1/2 year peak of $113.70 a barrel before it
subsided to $112.41, down 0.3 percent on the day, as doubts
about the strength of U.S. GDP took hold. [O/R]
Spot gold XAU= ascended to a lifetime high of $1,534.30 an
ounce, breaking records for the second session running. It
traded at $1,530.65 at 1045 GMT, up from $1,526.40 late in New
York on Wednesday. [GOL/]
(Additional reporting by Marius Zaharia in London, Ian Chua in
Sydney, Masayuki Kitano in Singapore and Ayai Tomisawa in Tokyo;
Editing by Toby Chopra)