European and U.S. stock markets mostly fell Thursday as investors awaited a speech from the Federal Reserve chairman that is expected to give more clarity on what the central bank is planning to do to prop up the ailing U.S. economy.
However, the prospect of more dollars floating around the system continued to pile the pressure on the currency itself.
In Europe, Germany's DAX closed up 20.75 points, or 0.3 percent, at 6,455.27 while the CAC-40 in France fell 9.17 points, or 0.2 percent, at 3,819.17. The FTSE 100 index of leading British shares ended 20.14 points, or 0.4 percent, lower at 5,727.21.
In the U.S., the Dow Jones industrial average was down 18.27 points, or 0.2 percent, at 11,077.81 around midday New York time while the broader Standard & Poor's 500 index fell 2.57 points, or 0.2 percent, to 1,175.53.
Following the Asian session, when stocks remained buoyed by mounting hopes the Federal Reserve is planning to ease policy further next month, markets have been fairly steady given recent big gains.
Figures showing the U.S. labor market remains in the doldrums just added weight to what investors have already fully priced in _ that the Fed is planning another monetary stimulus and possibly the creation of an inflation target.
All eyes will be on Fed chairman Ben Bernanke Friday when he delivers a speech on monetary policy, more or less at the same time as monthly inflation figures are set to show price pressures in the U.S. economy remain subdued.
Analysts said it's no longer a question of if but how and how much money the Fed will pump into the U.S. economy.
Stocks have been buoyant for over a week as investors have priced in the growing likelihood that the Fed would join the Bank of Japan in easing monetary policy further in an attempt to further drive down rates on mortgages, corporate loans and other debt in the ultimate hope of boosting economic activity and supporting prices.
Though the prospect of more dollars in the financial system has been a boon to stocks, the dollar has tanked.
"The dollar sell-off has accelerated following the release of the latest set of FOMC minutes which had signaled that members are considering more unconventional measures to lift inflation expectations including introducing a price level or nominal GDP target," said Lee Hardman, currency economist at the Bank of Tokyo-Mitsubishi UFJ.
"Dollar holders' anxiety over the potential implications of upcoming Fed policy actions has understandably ratcheted up another notch," Hardman added.
The already-pressured dollar was hit further by the news that the Monetary Authority of Singapore widened the trading band for the Singapore dollar amid rising worries over inflation and said it was maintaining its policy of a modest and gradual appreciation of its currency.
"This move has prompted further U.S. dollar selling, especially in Asian currencies, sending the Australian dollar near to parity, and the yen to new 15 year highs," said Michael Hewson, market analyst at CMC Markets.
By late afternoon London time, the euro was 0.7 percent higher at $1.4057 after having earlier risen as far as $1.4121, its highest level since late January. The euro has returned to favor recently given the seeming policy divergence between the Fed and the European Central Bank, which has balked at the idea of further monetary easing.
"As the ECB continues its exit from emergency monetary policies, we expect further upside pressure on the euro," said Jane Foley, senior foreign exchange strategist at Rabobank International.
Meanwhile, the British pound was 0.6 percent firmer at $1.5980, just shy of its earlier eight-month high of $1.6066, while the Australian dollar was close to breaking parity with the U.S. dollar for the first time in 28 years. It earlier traded as close as $0.9993.
The dollar was also down 0.4 percent against the Japanese yen, to 81.47 yen, following its earlier fall to a fresh 15-year low of 80.94 yen.
The yen is now within touching distance of its post-World War II low against the dollar of 79.75 yen, which will do nothing to lift the mood among Japan's export-heavy business executives, who have voiced their worries about the export-sapping appreciation of the currency.
As a result, the markets are on the lookout for another intervention from the Bank of Japan _ last month it bought dollars and sold yen directly for the first time in six years to stem the tide.
"If the intervention policy is to regain its credibility they cannot really afford to let this rate crack 80 yen too soon," said Daragh Maher, deputy head of global FX strategy at Credit Agricole.
Earlier in Japan, stocks joined in the global rally and the benchmark Nikkei 225 stock index jumped 180 points, or 1.9 percent, to 9,583.51.
South Korea's Kospi added 1.2 percent to 1,899.76, while Australia's S&P/ASX 200 rose 1.7 percent at 4,699.1, as did Hong Kong's Hang Seng index, which closed at 23,852.17.
Benchmark oil for November delivery was up 46 cents to $83.47 a barrel in electronic trading on the New York Mercantile Exchange.
Associated Press Writer Pamela Sampson in Bangkok contributed to this report.