* World shares gain ground ahead of U.S. rate decision
* Fed expected to keep "low for long" language on rates
* Dollar steady before Fed, euro off lows on Greece aid
(Updates prices)
By Ian Chua
LONDON, March 16 (Reuters) - World stocks rose on Tuesday
while the dollar was corralled as investors bet the U.S. central
bank will repeat its vow of keeping interest rates low for an
extended period.
The Federal Reserve is expected to leave benchmark rates
near zero given lingering labour market weakness and nagging
doubts about the solidity of the economic recovery. The outcome
of the meeting is due at 1815 GMT. []
Leaving out 'extended period' in the statement would likely
cause U.S. Treasury yields to rise and boost the dollar as it
would be seen by the market as a further step towards
normalising ultra-loose monetary policy, analysts said.
"The market looks about right in pricing November as the
start of the Fed tightening cycle, but the prospect that excess
liquidity is withdrawn earlier suggests the risk to U.S. yields
and the dollar remains to the upside," said Chris Turner, head
of FX strategy at ING.
MSCI's all-country world index <.MIWD00000PUS> rose 0.4
percent, with the pan-European FTSEurofirst 300 <> gaining
0.7 percent. Japan's Nikkei closed 0.3 percent <> lower as
the market took a breather after having risen to a seven-week
high in the previous session.
U.S. stock index futures <NDc2><DJc2><SPc2> were all up
about 0.2 percent, signalling a firm start on Wall Street.
The Fed's decision comes as investors braced for China to
further tighten policy following a recent raft of strong
economic data and inflation at a 16-month high in February.
This has been keeping equity investors cautious.
In contrast, the Bank of Japan, which will announce the
outcome of its meeting on Wednesday, is seen leaning towards
easing monetary policy again, under pressure from a government
calling for action to beat deflation. []
DOLLAR SOFT
In the forex market, the dollar index <.DXY>, a gauge of its
performance against six other currencies, slipped 0.3 percent to
80.005, but held above a three-week low of 79.692 set set on
Friday.
"No one seriously expects much change in the Fed's language,
but the market thinks that if there is a risk it will be that
they are more upbeat, which would benefit the dollar," said
Jeremy Stretch, currency strategist at Rabobank in London.
The euro crept up against the dollar and yen as EU finance
ministers discussed standby plans drawn up by countries using
the euro to provide Greece with financial help if it becomes the
first state in 11 years of monetary union to seek such aid.
[]
The single currency hit session highs after data showed
German ZEW institute's economic sentiment index came in higher
than expected. []
It rose 0.4 percent on the day to $1.3722 <EUR=> and gained
0.6 percent to 124.47 yen <EURJPY=R>.
With stocks rising, demand for lower risk government debt
eased, driving yields higher. The benchmark U.S. 10-year note
yield <US10YT=RR> climbed 1.3 basis points to 3.71 percent,
while the euro zone benchmark German Bund yield <EU10YT=RR>
edged up 1.8 basis points to 3.172 percent.
U.S. crude futures <CLc1> rose 0.5 percent to $80.18 a
barrel, recovering from a 1.8 percent slide to the lowest close
in two weeks on Monday.
Spot gold <XAU=> rose to around $1,115 an ounce, up more
than $4 from New York's notional close, while copper prices
<MCU3=LX> gained 1.2 percent to $7,385 a tonne.
(Additional reporting by Tamawa Desai and Jessica Mortimer,
editing by Mike Peacock)
