The dollar tumbled to its lowest level since early May and stock and bond markets curbed some of their resurgent appetite for risk on Thursday as investors waited to see whether the U.S. Federal Reserve announces a new round of money printing.
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 - was 0.5 percent lower by 0830 GMT with markets in London .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI all in the red.
Commodities from oil to gold as well as European government bond markets remained in tight ranges before the Fed decision which is expected to be released at 1630 GMT, 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 U.S. currency, helped by the signs the euro zone may be starting to get on top of its debt troubles.
"Any good will 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."
Read more: http://www.reuters.com/article/2012/09/13/us-markets-global-idUSBRE88901C20120913
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