Dollar near 5-week low, gold up after best month, Nikkei down as yen gains

Setting the dollar on its slippery slope was a Wall Street Journal report that the Fed may debate tweaking its forward guidance message to hammer home its message that it will not be raising rates any time soon.

Against a basket of currencies the greenback was down 0.3% at 81.697 with the softness also adding to the upward pressure on the euro, which was at a five-week high following better economic data this week.

A flurry of merger activity helped lift Europe's broad FTSEurofirst 300 share index 0.2% as the region's markets opened, while Europe's debt markets saw a largely quiet start to the day.

A 3% drop in Tokyo's Nikkei in Asia, however, left world stocks flat overall, capping a slow end to what has otherwise been their strongest month in almost two years.

With both the Fed and the European Central Bank meeting next week, plus some significant political events in Europe, BNP Paribas economist Ken Wattret said investors were likely to remain cautious.

"You look at the equity markets and the data in the U.S. and Europe has been good yet we are flat, so that probably tells you that we have had a good run and there is a bit of a pause going on," he said.

"And next week we have a lot going on so the market is in a bit of a wait-and-see mode."

Talk of the Fed reiterating its supportive stance next week also buoyed gold, seen by investors as a good hedge against potential inflation.