* Dollar hits 3-year low after euro zone inflation rises
* European stocks and world equities index inch up
* Gold charts new record
* Aussie dollar reaches 29-year high
(Updates with new 3-year low for dollar, new gold high)
By Mike Peacock
LONDON, April 29 (Reuters) - The dollar slid to a
three-year low on Friday after inflation data suggested euro
zone interest rates will rise again this summer, while stocks
paused for breath and gold climbed to a new record.
Analysts see little upside for the dollar following the
Federal Reserve's pledge this week to continue with near-zero
rates for an "extended period" while central banks in Europe,
Asia and Latin America are tightening policy.
Inflation in the 17-nation currency bloc edged up to 2.8
percent in April, well above the 2 percent target ceiling of the
European Central Bank, which raised rates for the first time in
two years earlier this month. []
"The inflation numbers support the view that the ECB will
deliver another interest rate hike before long. Indeed, although
we expect a rate increase at the July meeting, the balance of
risks is tilted towards an earlier move," said Aline Schuiling,
senior economist at ABN AMRO.
The euro was trading at $1.4870 <EUR=> by 1200 GMT, close to
a 17-month peak of $1.4882 hit on Thursday. The single currency
also rose to a six-month high against sterling. []
With Thursday's weak U.S. GDP and jobless data offering no
relief to the dollar, the index <.DXY> which tracks its
performance against a basket of major currencies fell to its
lowest level in three years.
The dollar index fell as low as 72.850 and the greenback
also hit a record low against the Swiss franc <CHF=>, while the
high-yielding Australian dollar <AUD=D4> posted a new 29-year
high.
The index is down about 7.5 percent this year, making the
dollar one of the world's worst-performing assets, and is on
track for its biggest weekly fall since mid-January.
Sean Callow, a strategist at Westpac in Sydney, said
sentiment towards the dollar was "profoundly bearish with no
catalyst for reversal", at least until all-important U.S.
non-farm payrolls data next week.
With investors assuming rock bottom U.S. rates will continue
to drive money into riskier assets, world equities as measured
by the MSCI index <.MIWD00000PUS> are up by some 5 percent over
the past two weeks. They inched up again on Friday.
European shares <> gained just 0.1 percent following a
six-session winning streak, with volumes crimped by a holiday in
Britain for the Royal Wedding.
U.S. stock index futures pointed to a flat or slightly
higher open on Wall Street <SPc1>.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asset returns since first hints of Fed QE2
http://r.reuters.com/pyc39r
Fed rate hike expectations: http://r.reuters.com/xyz48r
Graphic on silver: http://r.reuters.com/duj88r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
GOLD ASCENDANT
A broad commodity rally, which had showed signs of flagging
earlier in the day, picked up momentum again as the dollar
plumbed new depths.
Spot gold hit a record for the third straight session,
approaching $1,540 an ounce as a falling dollar increased the
metal's appeal as a hedge against the U.S. currency.
Bullion <XAU=> was up 0.3 percent at $1,539.15 by 1200 GMT
after earlier setting an all-time high of $1,539.60. It has
posted records in 10 out of the last 11 sessions.
U.S. crude futures for June <CLc1> climbed 0.35 percent to
$113.25 a barrel, reversing earlier losses.
Further gains are expected unless the dollar recovers.
"If the dollar continues to weaken, then it's only likely to
boost gold as well as silver as the inverse relationship between
the two assets persists," said Ong Yi Ling, investment analyst
at Phillip Futures in Singapore.
The 19-commodity Reuters-Jefferies CRB index <.CRB>, a broad
indicator of the commodity market, is up nearly 10 percent this
year, making it the world's best performing asset group.
* 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 Jessica Mortimer, Atul Prakash and
William James in London, Ian Chua in Sydney, Umesh Desai and
Jongwoo Cheon in Singapore; Editing by Patrick Graham)
