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Published: Thursday September 13, 2012 MYT 3:44:00 PM

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

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