GLOBAL MARKETS-Dollar plunges, stocks up on Singapore move

* Singapore widens trading band; currency at record high

* Dollar index touches year's low, world stocks gain

* Gold prices set for fifth consecutive weekly rise

(Adds close of European markets)

By Jennifer Ablan

NEW YORK, Oct 14 (Reuters) - The U.S. dollar index hit the year's low and world stocks were modestly higher on Thursday after Singapore let its currency strengthen, spurring gains in most major currencies against the struggling greenback.

The Australian dollar, which boasts the highest yield among major currencies, soared to a 28-year high at $0.9994 and poised to near parity.

Investors continued to dump the dollar against the backdrop of Singapore's move and on rising expectations the Federal Reserve will engage in another round of "quantitative easing" -- effectively printing money to buy assets.

The Singapore dollar hit a record high while the Chinese yuan hit its highest closing level against the U.S. dollar since July 2005. See [ID:nSGE69D09L]

Singapore's decision to widen and raise the trading band for the Singapore dollar -- an indication Asian economies are now strong enough to tolerate monetary tightening -- follow the recent move by emerging market power Brazil to curb currency appreciation. Similarly, Thailand is also considering a tax on speculative capital inflows.

"Effectively the Singapore move is a tightening of policy and it clearly shows Asian economies are at the opposite end of the spectrum compared to the spare capacity in the U.S. economy," said Chris Turner, head of FX strategy at ING.

Speculation of aggressive monetary action from the Federal Reserve intensified further after new U.S. claims for first-time jobless benefits rose last week For details, see [ID:nLDE69D1P9]

Gold, one of the market's favorite safe haven securities, hit a record high of $1,387.10 an ounce in early New York trade and set for their fifth consecutive weekly rise.

DOLLAR IN THE DUMPS

The dollar index <.DXY>, which tumbled 1 percent to its weakest since December at 76.259, is on course to test trendline support at 75.95, with its November low of 74.17 then not far away.

The euro , which earlier surged to a more than eight-month high of $1.4123 on trading platform EBS, traded up 0.69 percent at $1.4059 in mid-day New York trading. Against the Japanese yen, the dollar was down 0.37 percent at 81.47 from a previous session close of 81.770.

The currency markets weren't alone in stealing the spotlight on Thursday. Spot gold prices hit a record of $1,387.10 an ounce early Thursday, but traded around $1372.50 in mid-day New York.

Ashraf Laidi, chief market analyst at CMC Markets in London, said that once the United States' second round of quantitative easing "becomes the new normal, selling pressure on the U.S. dollar could well ease as traders begin anticipating the days of similar moves by the Bank of England and the ECB."

Global stock indexes gained, with the MSCI world equity index <.MIWD00000PUS> up over 0.21 percent to 317.04, but the Thomson Reuters global stock index <.TRXFLDGLPU> dipped 1 percent, after hitting two-year highs.

In the United States., benchmark indexes were down. The Dow Jones industrial average <.DJI> was down 30.42 points, or 0.27 percent, at 11,065.66. The Standard & Poor's 500 Index <.SPX> was down 5.73 points, or 0.49 percent, at 1,172.37, while the Nasdaq Composite Index <.IXIC> was down 7.18 points, or 0.29 percent, at 2,434.05.

European shares moved in sympathy with U.S. markets, dragged by worries over the banking sector's health. The pan-European FTSEurofirst 300 <.FTEU3> index of top shares provisionally closed 0.2 percent lower at 1,84.93 points.

Most of the U.S. Treasury debt curve was down.

The benchmark 10-year U.S. Treasury note was down 8/32, with the yield at 2.45 percent. The 2-year U.S. Treasury note was down 1/32, with the yield at 0.375 percent. The 30-year U.S. Treasury bond was up 1/32, with the yield at 3.82 percent.

In energy and commodities prices, U.S. light sweet crude oil rose 3 cents, or 0.04 percent, to $83.04 per barrel and the Reuters/Jefferies CRB Index <.CRB> was up 1.18 points, or 0.39 percent, at 300.92. (Additional reporting by Steven C. Johnson in New York; Editing by Neil Stempleman and Andrew Hay)