* Dollar falls hard as Fed scales back rate hike
expectations
* World shares hit highest since start of year
* European shares swoon as exporters wince at higher euro
* U.S. crude, Brent continue to rise
* Emerging market shares jump 3 percent
(Updates with U.S. prices, changes comment, dateline; previous
LONDON)
By Rodrigo Campos
NEW YORK, March 17 (Reuters) - The U.S. dollar index dropped
to a five-month low on Thursday while shares in major markets
were on track to close at their highest level of the year as a
dovish U.S. Federal Reserve emboldened investors to take in more
risk.
Traders continued to digest the previous day's statement and
projections from the Fed, which scaled down to two its
expectations of the number of U.S. rate hikes likely over the
next nine months. It previously estimated four hikes through
2016.
As the dollar declined, commodity prices rose to their
highest this year .TRJCRB , as did stocks across emerging
markets .MSCIEF . Those heavily reliant on manufactured
exports, like the Japanese market and European automakers, fell.
On Wall Street, miners were boosted by stronger commodity
prices.
"Risk is thoroughly on," said Kit Juckes, Societe Generale (PA:SOGN)
global head of currency strategy. "All the chit-chat was that
they (the Fed) were going to be hawkish, and they weren't.
"The dollar is obviously the loser, but it's good for
shares, it's good for oil..."
The Dow Jones industrial average .DJI rose 86.98 points,
or 0.5 percent, to 17,412.74, the S&P 500 .SPX gained 6.56
points, or 0.32 percent, to 2,033.78 and the Nasdaq Composite
.IXIC dropped 5.62 points, or 0.12 percent, to 4,758.35.
Despite Europe's .FTEU3 0.5 percent decline, MSCI's
46-country share index .MIWD00000PUS climbed 1.2 percent on
the day to reach its highest since Jan. 4, the opening trading
day for most markets this year.
A more than 3 percent surge catapulted emerging market
stocks .MSCIEF to their highest since mid-December. Stocks in
Brazil .BVSP rose 5.5 percent, the most for any day since late
October 2009.
The jump in the yen, however, meant Japan's Nikkei .N225
lost out, and it closed down 0.2 percent. Dollar-denominated
Nikkei futures NKc1 fell 1.4 percent.
A MATERIALS WORLD
Copper prices CMCU3 briefly hit their highest since
November, and were last up more than 2 percent.
Brent oil LCOc1 jumped above $41 a barrel as a number of
large producers also nailed down a date to discuss an output
freeze. U.S. crude CLc1 flirted with $40 and was up 3.3
percent at $39.73.
"For now, the (oil) market is staying well supported, and
the dollar is proving additional support," said Olivier Jakob,
oil analyst at Petromatrix. "It will be difficult to return to
the lows of the year."
An index of prices across the commodity complex .TRJCRB
rose 1.5 percent to the highest level this year.
In currency markets, the dollar sank against the euro, yen
and Swiss franc. The dollar index .DXY touched its lowest
since October.
Against the yen JPY= , the greenback touched its lowest
since October 2014. The sharp move triggered market chatter that
the Bank of Japan had been speaking to dealers about activity in
the yen, but several traders contacted by Reuters said they did
not have any indication the central bank was intervening.
"It would be a bit strange for the BoJ to start
intervening," said Charles St-Arnaud, senior strategist and
economist at Nomura International in London. "You're just a
month after the G20 where (Japan) pledged not to use competitive
devaluation to their advantage and to let market forces
determine the currency."
Benchmark 10-year note US10YT=RR yields fell to one-week
lows, while U.S. two-year notes US2YT=RR , the maturity most
sensitive to Fed rate expectations, slid to a two-week trough.
The 10-year note was last up 10/32 to yield 1.9029 percent,
compared with 1.938 percent late on Wednesday.
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Currencies vs dollar http://link.reuters.com/tak27s
Oil prices http://link.reuters.com/beb23v
EM equities and the dollar http://link.reuters.com/syv58s
Commodities performance http://link.reuters.com/rac73w
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