* Dollar hits 3-year low, no change of tack seen from Fed
* World stocks edge higher, Europe up for fifth session
* No let up for fringe euro zone bonds
* Silver rebounds after sharp losses
(Updates prices, adds bonds, sterling, U.S. stock futures)
By Mike Peacock
LONDON, April 27 (Reuters) - The U.S. dollar plumbed a
three-year low against other major currencies on Wednesday
before a Federal Reserve decision which is expected to reaffirm
its ultra-easy policy, while world stocks crept higher.
The dollar <.DXY> skidded to 73.493 against a currency
basket, driven by widening interest rate differentials, before
recovering slightly.
The index is now close to 10 percent below its peak in
January and many traders expect it eventually to revisit an
all-time low of 70.698 hit in 2008. []
The Fed is set to confirm it will complete its $600 billion
bond-buying programme and renew its commitment to rock-bottom
borrowing costs for "an extended period". []
Interest is particularly intense because Ben Bernanke will
hold the first-ever regularly scheduled news conference by a
U.S. central bank chief at around 1815 GMT.
"It's clear Fed monetary policy is the reason for dollar
weakness. If we don't get any hint that the Fed will normalise,
the dollar will continue to stay under selling pressure," said
Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
While the Fed continues to print money, the European Central
Bank raised rates for the first time in two years this month and
is poised for a repeat dose before too long.
The euro flew to a high of $1.4715 <EUR=> after breaking
above $1.47 for the first time since December 2009. It was last
at $1.4670, having traded below $1.29 at the start of the year.
Within the euro zone, there was no let up for the bonds of
the bloc's high debtors as speculation that Greece will have to
restructure ran unchecked.
Greek government bond yields surged to fresh euro-era record
peaks, with 10-year borrowing costs nearing an eye-watering 16
percent, while Portuguese 10-year yields edged up to a new high
of 10.18 percent <PT10YT=TWEB> as the country's caretaker
government negotiates on the terms of a bailout. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Fed funds rate expectations: http://r.reuters.com/xyz48r
Fed QE timelines: http://r.reuters.com/faq98r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
WORLD STOCKS FIRM
The FTSEurofirst 300 index of top European shares was up 0.5
percent at 1,152 points by 1100 GMT, gaining ground for the
fifth session as investors focused on strong results from
bellwethers such as Ericsson <ERICb.ST> and Renault <RENA.PA>.
U.S. stock futures pointed to a slightly firmer start on
Wall Street, following solid company earnings on Tuesday, and
world stocks as measured by the MSCI All-Country World Index
<.MIWD00000PUS> were up 0.25 percent at 352.87.
Japan's Nikkei <> closed up 1.4 percent but it could
face downward pressure after ratings agency Standard & Poor's
revised its outlook on Japan's sovereign debt to negative, a
move which caused the yen to slip.
Aside from the ECB, Asian and Latin American central banks
have also been tightening monetary policy for some time.
The split in monetary policy has helped revive the "carry
trade", in which investors borrow in a low-yielding currency to
invest in higher-yielding assets or currencies.
Investors have been snapping up the high-yielding Australian
dollar <AUD=D4> -- against which the greenback hit a 29-year low
on Wednesday following a big jump in Australian inflation --
while China let the yuan <CNY=SAEC> rise to a post-2005
revaluation high, triggering gains in emerging Asian currencies.
On the other hand, prospects of a near-term Bank of England
rate rise receded further after a reading of first quarter UK
growth only just reversed the previous quarter's fall.
Sterling <GBP=> rose, nevertheless. Traders said the market
had positioned for a weaker reading which drove investors to
quickly cut short positions after the fact.
SILVER LINING
Silver, the superstar commodity of the year, steadied from a
three percent fall on Tuesday, its biggest one-day loss in six
weeks, which followed Monday's rally to near record levels.
Spot silver <XAG=> was flat at $45.25 an ounce and is on
track for a 21 percent gain this month and a 47-percent rise
this year, making it the top performing precious metal.
Spot gold <XAU=> steadied at $1,505.50 by 1100 GMT, well
below Monday's record high at $1,518.10. Brent crude for June
<LCOc1> rose 36 cents to $124.50 a barrel.
"Oil will continue to trade in this range till the outcome
of the Fed meeting is known at least," said Serene Lim, an
analyst at ANZ.
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope Blog, click on
http://blogs.reuters.com/macroscope
* For Hedge Fund Blog, click on
http://blogs.reuters.com/hedgehub
(Additional reporting by Naomi Tajitsu in London, Blaise
Robinson in Paris and Ian Chua in Sydney; Editing by Catherine
Evans/Toby Chopra)
