(Updates as of 1051 EDT)

By Elizabeth Howcroft and Alden Bentley

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

weighed on global stocks on Friday after a week of record

setting advances fueled by a series of dovish central bank

moves, while the dollar struggled to extend a gain as U.S.

yields ticked lower.

While the S&P 500 and Nasdaq opened a bit

lower, and the Dow was basically flat, Wall Street's key

indexes looked set for weekly gains. The MSCI World Equity Index

was down 2.30 points, or 0.29%, but up 1.7% on

the week, on track for its biggest weekly gain this year.

A surprise rate cut from 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 morning lost 0.19%, standing at

5,231.45, the Dow was last down 0.42% at 39,615.37, and the

Nasdaq Composite lost 0.17%, to 16,374.09. On the week

so far they were up 2.2%, 2.5% and 2.3%, respectively.

Europe's STOXX 600 fell 0.05%, after touching a new

all-time high, while London's FTSE 100 was up almost 0.7%

, 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 reduce in the lead-up to the Easter

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 0.33% at 104.33, on track for

its best week since the first week of the year, with the euro

down 0.42% at $1.0814. The probability of a European

Central Bank rate cut before summer is increasing, Bundesbank

President Joachim Nagel said.

The British pound weakened 0.43% at $1.26, having

earlier hit a one-month low.

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

5.9 basis points on Friday to 4.212%, 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 sudden move knocked the Shanghai Composite index

, which fell 0.95%. MSCI's broadest index of Asia-Pacific

shares outside Japan closed 1.03%, while Japan's

Nikkei rose 0.18% to a record high close.

U.S. crude lost 0.21% to $80.9 a barrel and Brent

fell to $85.64 per barrel, down 0.16% on the day. The

possibility of a ceasefire in Gaza weighed on prices, along with

the stronger dollar and lower U.S. gasoline demand.

Spot gold lost 0.37% to $2,172.80 an ounce, but was

near a record bid high set on Thursday.

Investment flows into gold in the week to Wednesday reached

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

said.