The euro hit a five-week high against the dollar while world stocks and gold rose on Thursday after the U.S. Federal Reserve set out an unambiguously easier policy stance, but fears of a messy Greek debt default kept investor enthusiasm in check.
Fed Chairman Ben Bernanke said the U.S. central bank might consider further monetary easing through bond purchases. It also pushed back the likely timing of an eventual interest rate hike to late 2014, and set a formal inflation target of 2 percent.
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Riskier asset markets around the world rose in the wake of the Fed's statement, and the safe-haven U.S. dollar fell against a broad range of currencies, despite the implications of the policy stance for the U.S. growth outlook.
"It tells us an awful lot about the state of the economy in the United States. If the Fed is telling us interest rates are going to stay low the recovery must be fragile," Louise Cooper, markets analyst at BGC Partners said.
The MSCI world equity index was up 0.6 percent to 318.38, extending its strong start to 2012 with gains of over 6 percent for the year to date.
Markets in Asia also strengthened, with the MSCI's broadest index of Asia-Pacific shares outside Japan rising 1.1 percent to its highest level in nearly three months.
The FTSEurofirst 300 index of leading European shares was up 0.4 percent to 1,044.19 points, led by mining stocks which, like commodities, benefit from an easier U.S. dollar.
U.S. stock index futures are pointing to the key Wall Street markets giving up some of the gains made on Wednesday in the wake of the Fed announcement.
The euro was near five-week highs at $1.3110, little changed on closing New York levels, while the dollar index eased to around 79.18, near a five-week low.
"The main surprise was they (the U.S. Fed) were unequivocally dovish in their statement, which suggested they do not need data to deteriorate to justify easing monetary policy further," said Michael Sneyd, FX strategist at BNP Paribas.
GREEK DEBT TALKS KEY
Greece remains in focus, with the top negotiator for private creditors scheduled to return to Athens later on Thursday to resume talks with officials on a debt swap deal as the clock ticks down to a March deadline when Greece faces major bond redemptions.
Greek media, without quoting any sources, reported that the private creditors are willing to improve their "final offer" of a 4 percent interest rate on new Greek bonds in order to clinch a deal in time to avert default. The European Central Bank is also under pressure take losses on its estimated 40 billion euros of Greek bonds.
Investors will also watch the results of a debt auction in Italy on Thursday. Ten-year Italian bond yields are just above 6 percent, down from peaks late last year above the 7 percent "danger level" beyond which other countries sought bailouts.
German government bonds were firmer, in line with the rise in U.S. Treasuries which followed the Fed's statement.
The March Bund futures contract was 45 ticks higher at 138.27, though it failed to break through Monday's 138.45 high. Ten-year bond yields were almost 3 basis points lower at 1.919 percent.
The yield on the 10-year U.S. Treasury bond edged down to 1.975 percent from 2.002 percent in late U.S. trade.
Gold, which posted its biggest one-day gain in four months on Wednesday, was at its highest level in more than a month in choppy trade due to the Fed's pledge to keep rock-bottom rates for at least two more years.
In Europe, gold was steady at $1,716.20 an ounce after reaching its highest since early December.
Low interest rates often make zero-yielding gold more attractive, while minimal borrowing costs also tend to fuel a gradual increase in commodity prices, supporting gold's traditional role as a hedge against inflation.