World shares were steady near all-time highs and the dollar and benchmark US Treasuries and Bunds firmed on Thursday, as the head of the Federal Reserve left markets assessing how to handle the inevitable phasing out of its support.
The yen was under pressure in the currency markets as focus switched to Japanese weekend elections that are expected to strengthen the hand of Prime Minister Shinzo Abe and his radical economic stimulus policies.
Markets are also watching a meeting in Moscow of G20 finance ministers for signs of an orchestrated approach to the end of US money-printing, which could help defuse volatility in global markets.
The G20, which meets on Friday and Saturday, includes many of the developing countries that have been at the sharp end of the dollar's surge since Bernanke first signalled the fed would roll back its bond buying in May.
By mid-morning in Europe, the dollar index was up 0.1 percent but starting to sag following overnight gains made after Fed chief Ben Bernanke on Wednesday stuck to a timeline to wind down its $85 billion a month bond-buying programme.
Bernanke went out of his way to stress that the cautious withdrawal would depend on economic conditions, comments that helped comfort asset markets.
The broad FTSEurofirst 300 share index had recovered from a soft start to the day to be up 0.2 percent by 0930 GMT as it consolidated the 8 percent gains it and MSCI's world index have made over the last month.
Mouhammed Choukeir, Chief Investment Officer of fund manager Kleinwort Benson, said that while Bernanke's comments would help markets for now, investors would remain extremely edgy about the inevitable withdrawal end of uber-easy monetary policy.
"QE (quantitative easing) is here to stay a little longer, but it has to stop one day. The volatility in the past few weeks has perhaps been a glimpse of what is to come," Choukeir said.
"Where a QE world is a world in which risk assets (equities) go up and safe havens (government bonds and gold) also go up, it would appear that a new post-QE world is one where risk assets go down and safe havens also go down."
Wall Street was expected to open little changed according to U.S. futures, with U.S. unemployment data and the Philly Fed business survey stacking on top of another busy day of company earnings.
Back in the currency market, the dollar rose 0.6 percent versus the yen to push it back above 100 yen, while the euro hit a seven-week high of 131.45 yen as Sunday's Upper House elections in Tokyo moved into view.
Japan's massive monetary stimulus plan under Prime Minister Shinzo Abe was one of the main catalysts for markets during the early part of the year, causing a 14 per cent plunge in the yen. The weekend polls are expected to strengthen his grip on power.
"The market is of the view the Abe administration will come out of this very well, so post-election it will be an interesting time because we could see the rhetoric around the reform plans picking up," said Morgan Stanley's head of European FX strategy Ian Stannard.
"If this is the case we will start to see the yen coming under pressure again." Stannard added that he expects a sharp yen fall against the dollar later this year and early next.
In debt markets, benchmark German Bunds tracked minor Bernanke-fuelled gains overnight by US Treasuries to hit a five-week high.
A no confidence vote against Portugal's ruling coalition later in the day turned the focus to peripheral euro zone debt.
The motion proposed by a minor party is likely to fail, but markets will be on the lookout for any signals sent by the three main parties, which are holding talks on a broad deal to keep the country's bailout programme on track.
Spain and France both saw smooth bond auctions on Thursday despite a tougher backdrop, with Spain's prime minister fighting a corruption scandal and France having just lost its last triple-A sovereign credit rating from a major ratings agency.