Fed stimulus vow lifts global markets, Greece talks eyed

London: The euro hit a five-week high against the dollar while world stocks and gold rose yesterday after the US 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 US 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 two per cent.

Riskier asset markets around the world rose in the wake of the Fed's statement, and the safe-haven US dollar fell against a broad range of currencies, despite the implications of the policy stance for the US 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 per cent to 318.38, extending its strong start to 2012 with gains of over six per cent for the year to date.

Talks to resume

Markets in Asia also strengthened, with the MSCI's broadest index of Asia-Pacific shares outside Japan rising 1.1 per cent to its highest level in nearly three months.

The FTSEurofirst 300 index of leading European shares was up 0.4 per cent to 1,044.19 points, led by mining stocks which, like commodities, benefit from an easier US dollar.

US 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 US 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.

Greece remains in focus, with the top negotiator for private creditors scheduled to return to Athens late last night 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.

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.