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World markets calm after Fed ructions

Friday, March 21 12:29:10

World markets steadied today after a volatile week driven by speculation over shifts in U.S. monetary policy, with stocks up, Bunds flat and the euro set to snap a six-week run of gains against the dollar.

Speeches from U.S. Federal Reserve officials later in the day will be parsed for clues to the pace of U.S. tightening and could drive fresh market moves.

Approaching the start of U.S. trade, stock index futures on the Standard & Poor's 500 were up 0.3 percent, while two-year Treasury yields remained around a six-month high.

"Investors are awaiting for further confirmation from the Fed on its rate path especially if U.S. data in the second quarter starts to look up," said Geoffrey Yu, currency strategist at UBS. "For us, the dollar is a buy on dips."

Fed chair Janet Yellen surprised investors mid-week by hinting rates might rise earlier than they expected, while U.S. economic data on Thursday was mixed.

That kept the dollar near a three-week peak against a basket of major currencies and helped it gain 0.1 percent against the safe-haven Swiss franc and yen.

It dipped 0.1 percent against the euro, however, after the single currency got a boost from euro zone current account data, which hit a record high in January.

While the euro hit an intraday high of $1.3802, it remained on track to record its first weekly loss since late January and snap six weeks of gains, its longest such run since mid-2007.

The data helped counter earlier comments from European Central Bank Executive Board Member Sabine Lautenschlaeger, who said interest rates would remain low for an extended period or go even lower.

German benchmark debt futures were steady, down 1 tick at 142.38.

In Asia, currency attention was again on China's yuan, which extended recent losses. The currency has fallen more than 1.2 percent so far this week, putting it on track for its largest weekly loss since 1992.

Government economists and advisers involved in internal policy discussions told Reuters that the central bank chose to widen the yuan's trading band since it was less risky than other reform options while also offering a way to hedge against further economic slowdown.

In commodity markets, gold added slightly to moves in the Asian session to trade at $1,339.44 an ounce, but remained on course to post its biggest weekly fall since late November.

Brent crude was up 47 cents at $106.92 a barrel, just off its intraday high.