Dollar recovers as Fed worries about low inflation

The dollar recovered on Thursday, having hit its lowest in more than two weeks as U.S. central bankers showed they were taking a more guarded view of inflation, helped by a steep fall in the British pound. 

Asian stocks climbed to their highest in a decade, powering global shares to another record high and keeping them on course for their longest winning streak ever. Wall Street was set to open down from Wednesday’s record high ESc1. 

The dollar’s dip came after minutes of the Federal Reserve’s September meeting on Wednesday showed policymakers had a prolonged debate about whether inflation would pick up and the path of future interest rate rises if it did not.

European government bond yields fell in step with their U.S. peers. Italian yields led the trend, falling to near a three-week low after the government won support for electoral change likely to penalize the anti-establishment 5-Star Movement [GVD/EUR]. 

U.S. US10YT=TWEB and German 10-year yields DE10YT=TWEB fell 1 basis points to 2.33 percent and 0.45 percent, respectively. Italian yields were down 3 basis points at 2.14 percent IT10YT=TWEB.

The eye-catching move in stock markets came in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS reaching their highest since December 2007, up 0.7 percent on the day. 

Japan's Nikkei .N225 was up 0.4 percent after brushing 20,994.40, its highest since November 1996. South Korea's KOSPI .KS11 added 0.55 percent to reach a record high. Hong Kong's Hang Seng .HIS scaled a decade-high. 

MSCI’s broadest index of world stocks also reached record highs, as it has for six of the past eight trading days .MIWD00000PUS. It is on course for its 12th month of gains in October, its best run ever.