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GLOBAL MARKETS-Dollar set for worst qtr since 2002, Fed eyed

Published 09/30/2010, 03:12 AM
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* Dollar pinned at 8-mo lows; month-end flows eyed

* Euro wobbles after announcement on Anglo Irish bank

* Traders still wary of more yen intervention by Tokyo

* Asia stocks slip 0.4 pct but set for best quarter in a year

* All eyes on U.S. Fed, BOJ actions on monetary easing

By Vikram S.Subhedar

HONG KONG, Sept 30 (Reuters) - The dollar was stuck near an eight-month low on Thursday, hobbled by speculation of more quantitative easing from the Federal Reserve, while European stocks took a breather after September's rebound.

The euro, initially steady against the dollar, was down 0.4 percent on the day at $1.3578 after Ireland's central bank put a 34 billion euros ($46 billion) price on bailing out Anglo Irish Bank under a worst case scenario. [ID:nTKW007131]

Europe's major equity markets fell on Thursday, with the pan-European FTSEurofirst 300 <.FTEU3> index of top shares down 0.4 percent after the Anglo Irish announcement and a Moody's downgrade of Spain's credit rating by one notch to Aa1.

The dollar <.DXY> is down 8.3 percent this quarter against a basket of world currencies, its worst quarter in more than eight years, as a sluggish economy and stubbornly high unemployment levels in the United States have fuelled expectations of another round of asset buying by the Fed.

"Speculation of QE2 lingers and is not going away any time soon. That should keep the U.S. dollar under pressure," said Sue Trinh, senior currency strategist at RBC in Hong Kong.


For a comparison of global markets this year,

http://graphics.thomsonreuters.com/F/09/GLB_MKTQE.html

For Asian markets' performance, see:

http://graphics.thomsonreuters.com/F/09/AS_MARKETS.html

Asian stocks ex-Japan fell 0.4 percent but hovered near a two-year high and were set for their best quarter in a year as investors poured money into regional markets on the back of robust economic growth driven by China.

The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> has gained more than 17 percent this quarter, easily outperforming developed markets, with the S&P 500 <.SPX> up 11 percent and European shares <.FTEU3> up 7.2 percent.

For the year to date, the ex-Japan index is up around 7 percent.

Japan's Nikkei <.N225> ended 2 percent lower but still posted its best monthly performance in six, helped by expectations that further easing would curb the yen's strength. On a quarterly basis the Nikkei is flat, sharply lagging other major markets.

Mounting speculation that the Bank of Japan was preparing to ease monetary policy again and that it could take action at its meeting next Tuesday was keeping the yen's gains in check.

By the end of the Asian session, the dollar was at 83.38 yen , just above a 15-year low set just before Japan intervened to sell the yen on Sept. 15.

"The big turning point in September was intervention. The move has helped to soothe fears about a further advance in the yen and put the stock market back on a recovery path," said Masayuki Otani, chief market analyst at Securities Japan, Inc.

"Neither the United States nor Japan has changed their stance towards easing policy, and that will likely support the market. The domestic economy is seen slowing from now on, but a sharp slowdown is unlikely and stock prices will likely move to factor that in in advance and build on gains."

Gold ticked lower but held within sight of a record high hit in the previous session, underpinned by continued U.S. dollar weakness. Spot gold eased 60 cents to $1,308.15 by 0630 GMT. (Additional reporting by Charlotte Cooper and Masayuki Kitano in TOKYO; Editing by Alex Richardson)

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