Dollar heads for biggest weekly fall; oil retreats

U.S. Treasuries were steady in Asian trade after yields on Wednesday recorded their biggest single-day drop since the 1987 market crash on the Federal Reserve's surprise announcement it will purchase $300 billion in longer-dated U.S. government debt.

Asian stocks fell but looked set to gain for a second consecutive week -- marking their best weekly back to back gains since mid-December -- as the Fed's plan to inject a combined $1.15 trillion into the U.S. financial system improved battered confidence in the banking sector.

The Fed this week has tackled head-on the woes afflicting the world's largest economy, but the approach has also created uncertainties, mainly in the form of a weakening dollar and prospects of surging inflation once the economy starts recovering.

"This is a historic moment, the start of debasement of the world's reserve currency, and it feels to many participants that in the grand sweep of history we are witnessing the end of 'Rome' on the Potomac," said Alan Ruskin, a RBS strategist in Greenwich.

The Fed's massive expansion of its balance sheet could lead to an oversupply of the U.S. dollar and erode the safe-haven appeal that just earlier this month had sent the currency to a three-year high against a basket of currencies, analysts said.