Dollar slides, stocks subdued as Fed QE3 looms

LONDON: The dollar fell to its lowest level since early May and
stock and bond markets kept to tight ranges on Thursday while financial
markets waited to see whether the U.S. Federal Reserve announces a new
round of money printing later in the day.
The MSCI index of
global shares - which hit a five-month high on Wednesday after a German
court gave the green light to the euro zone's new bailout fund - inched
up 0.05 percent as markets in London <.FTSE>, Paris's CAC-40
<.FCHI> and Frankfurt's DAX <.GDAXI> opened mixed.
Commodities
from oil to gold as well as European government bond markets were also
in tight ranges before the Fed decision which is expected to be
released at 2:30 p.m. EDT, followed by Chairman Ben Bernanke's news conference about two hours later.
A
Reuters poll showed economists raised their bets of a third round of
Fed bond buying known as quantitative easing (QE) to 65 percent from 60
percent in August.
As the dollar suffered from expectations for
QE - which would be equal to printing money and diluting the value of
the currency - the euro stayed near four-month highs against the
dollar, helped by the signs the euro zone may be starting to get on top
of its debt troubles.
"Any goodwill towards risk assets,
probably more so in FX land, could be undone pretty quickly if Ben
Bernanke fails to live up to what is expected of him and the Fed board
today," said Chris Weston, trader at IG Markets.
A London-based
bond market trader who requested anonymity, struck a similar tone. "It
will be a massive disappointment if they don't do anything. We're
looking for QE3 and some extension of the zero interest rate policy. If
we don't get that it's probably going to be another excuse for Bunds to
sell off."
While the data calendar is light in Europe on
Thursday, U.S. figures will be released on employment and producer
prices. - Reuters