World shares and global bond prices surged on Thursday and the dollar fell after the U.S. Federal Reserve stunned markets by choosing to delay plans to cut back its asset-buying program.

From London to Tokyo, Istanbul to Jakarta investors celebrated the prospect of continued stimulus in the world's largest economy, even though the reasons behind it were concerns about the strength of U.S. recovery.

The Fed also cut its projection for 2013 economic growth to a 2.0 percent to 2.3 percent range from a June estimate of 2.3 percent to 2.6 percent. The downgrade for 2014 was even sharper.

MSCI's world share index .MIWD00000PUS, which tracks 45 countries, jumped 1.2 percent to a fresh five-year high as large gains in Asian markets were matched by a 1 percent jump by Europe's FTSEurofirst 300 .FTEU3.

U.S. stocks were also expected to open higher after hitting all-time highs after the Fed's decision on Wednesday. .N

The chance that U.S. interest rates could stay low for longer was further enhanced by news from the White House that noted-dove Janet Yellen was the front-runner to take over the Fed when Ben Bernanke steps down in January.

"The bottom line is that the (Fed) meant to send an extremely dovish message, not only through the lack of tapering, but also with its 2016 forecasts," analysts at Barclays wrote.

"We have pushed out our first rate hike forecast to June 2015 from March and now expect 10 year U.S. Treasury yields to end this year at 2.85 percent from 3.10 percent previously."

All of which was a huge relief to emerging markets, which have been suffering as higher yields in the rich world attracted away much-needed foreign capital.

The main emerging market stock index .MSCIEF jumped 2.3 percent. The Turkish lira and Indian rupee leapt more than 2 percent while Indonesia's main stock index climbed 4.8 percent .JKSE, the Philippines 3.1 percent, Australia 1.1 percent .AXJO and Japan's Nikkei .N225 1.8 percent.

"Markets are thrilled, and much needed reprieve for battered EM investors is on its way," said Frederic Neumann, co-head of Asian economics research at HSBC. "With Chinese data having turned up, and the Bank of Japan running at full speed, it looks like Asia might get its mojo back."

FED PROTEST

The Fed's decision to keep its asset buying at $85 billion a month was seen as a rebuff to the sharp rise in Treasury yields over recent months, which was proving a headwind for the housing market and the U.S. economy in general.

The bond market got the message and 10-year Treasury yields tumbled as low 2.675 percent before steadying at 2.704 percent. That was an effective easing in world financial conditions as Treasuries set the benchmark for borrowing costs almost everywhere.

"The market should have known better, you should not fight the central bank," said Didier Saint George, member of the Investment Committee at Carmignac Gestion whose funds have been snapping up beaten-down Asian stocks and currencies recently.

"The Fed is stuck between a rock and hard place, surely they cannot wait until the economy is in full spin to start normalizing policy, but conversely they have to be very cautious otherwise they damage the economy."

As yields on benchmark bonds around the world tumbled, Japanese debt dropped to four-month lows while in Europe German Bunds went as low as 1.827 percent after their biggest drop in yields in over a year.

The market's pushing back of the likely timing of the first hike in U.S. rates into 2015 sent the dollar tumbling across the board. The euro was up at $1.3551 as midday approached, having already gained 1.2 percent on Wednesday to its highest in almost eight months.

Against a basket of currencies, the dollar lost 1.1 percent in under 24 hours - mostly in earlier trading - to hit its lowest since February .DXY.

Only against the yen did it show some resilience, as the Bank of Japan is itself only in the early stages of a bond-buying program even larger than that of the Fed. <FRX/>

HEADRUSH OR HEADACHE

Wall Street, which saw both the S&P 500 .SPX and Dow Jones industrial average .DJI hit all-time highs after Wednesday's surprise, was expected to climb a further 0.3-0.4 percent when trading resumes.

However, the move created a headache for central banks in Australia and New Zealand, which would much prefer their currencies to be weaker.

The Australian dollar surged over 1.5 percent to $0.95, an effective tightening in conditions that will pressure the Reserve Bank of Australia to cut rates to compensate.

In contrast, the extension of U.S. stimulus was seen as an unalloyed positive for global commodity demand, and prices.

Spot gold stormed ahead to $1,370.06, a gain of almost $70 from early Wednesday, while copper futures jumped 2 percent to $7,328.

Brent crude added another 30 cents to $110.90 a barrel, up from a low of $107.64 on Wednesday. U.S. crude reached $108.71 compared with $105.32 early on Wednesday.

(Editing by Jeremy Gaunt)