(Updates at 1633 ET)

By Alden Bentley and Elizabeth Howcroft

NEW YORK/LONDON, March 22 (Reuters) - Profit-taking

capped global stock markets on Friday after a week of

record-setting advances fueled by a series of dovish central

bank signals, while the dollar struggled to extend a gain as

U.S. yields ticked lower.

The S&P 500, Nasdaq and Dow sought

direction from the open, with the benchmark S&P closing near

flat even as it posted its biggest weekly gain of 2024. The MSCI

World Equity Index fell 0.26%, but went up 1.8%

since late last Friday, its biggest weekly gain this year.

"It's been a busy week and it's one of those Fridays where

it just feels like every participant is tired. There's no huge

news to drive anything one way or the other, so you're seeing a

market that's hovering around the unchanged line," said JJ

Kinahan, CEO of IG North America and president of Tastytrade in

Chicago.

A surprise rate cut by Switzerland's central bank on

Thursday helped push markets to new highs, as traders realized

that major central banks around the world would not necessarily

wait for U.S. Federal Reserve rate cuts before delivering their

own.

Traders also drew confidence from the Bank of England being

more dovish than expected, saying the economy is "moving in the

right direction" for it to start cutting rates.

On Wednesday, the Federal Reserve left the fed funds rate

alone at 5.25% to 5.50% but indicated it was still prepared to

lower rates by 75 basis points this year, despite a worrying

uptick in U.S. inflation and economic growth solid enough to

maybe even dodge a soft landing.

It said that recent high inflation readings had not changed

the underlying story of slowly easing price pressures.

The S&P 500 on Friday fell 0.14%, to 5,234.18, the

Dow fell 0.77% and the Nasdaq Composite gained 0.16%, to

16,428.82. For the week they rallied 2.3%, 2.0% and 2.9%,

respectively.

Europe's STOXX 600 fell 0.03%, after touching a new

all-time high, while London's FTSE 100 rose 0.6%, helped

by expectations that the Bank Of England would cut rates sooner

than previously thought. BoE Governor Andrew Bailey told the

Financial Times that the expectation of more interest rate cuts

this year on a whole was not "unreasonable".

"I think there might be some profit-taking at the end of the

week, just because of the amount of data that we've seen and the

fact that we have seen more positive surprises," said Baylee

Wakefield, multi-asset fund manager at Aviva.

Trading may also subside in the lead-up to Easter next

weekend, Wakefield added.

"The dollar's basically going to have its best week since

January and that is because markets are now accepting that other

major central banks will reduce their policy rate faster than

the Fed, especially because we've had further evidence from the

strong economic data we've had out of the U.S. this week,"

Wakefield said.

The dollar index gained 0.4%, on track for its best

week since the first week of the year, with the euro down

0.5% at $1.0807. The probability of a European Central Bank rate

cut before summer is increasing, Bundesbank President Joachim

Nagel said.

Kinahan said the lack of a definitive date from the Fed for

when they might ease was dollar supportive. "I think with that

you may be able to see dollar hold on a little bit longer than

people would expect, with expected rate cuts."

The British pound weakened 0.5% to $1.26, having

earlier hit a one-month low.

The yield on benchmark U.S. 10-year notes fell

6.7 basis points on Friday to 4.204%, while the 2-year note

yield, which typically moves in step with interest

rate expectations, fell 3.9 basis points to 4.5934%.

Euro zone government bond yields were set for a weekly

decline. The benchmark German 10-year yield was down by about 11

basis points at 2.327%.

China's yuan dropped sharply during Asian trading, hitting a

four-month low, in a move analysts attributed to rising

expectations that there will be more monetary easing to prop up

the country's economy. The offshore yuan was priced at

7.2759 per dollar in late U.S. trade.

The sudden move knocked the Shanghai Composite index

down 0.95%. MSCI's broadest index of Asia-Pacific shares outside

Japan fell 1.1%, while Japan's Nikkei

rose 0.18% to a record-high close.

U.S. crude futures settled down 0.54% at $80.63 a

barrel and Brent futures fell 0.41% to $85.43 per

barrel. The possibility of a ceasefire in Gaza weighed on

prices, along with the stronger dollar and lower U.S. gasoline

demand.

Spot gold fell 0.73% to $2,164.96 an ounce, but was

near a record bid high set on Thursday. U.S. gold futures

fell 0.83% to $2,164.20 an ounce.

Investment flows into gold in the week to Wednesday reached

their highest in almost a year, Bank of America Global Research

said.

In cryptocurrencies, bitcoin fell 2.82% to

$63,620.00. Ethereum declined 4.74% to $3318.2.