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The Bank of Japan (BOJ) is also expected to maintain its ultra-loose monetary policy later in the day and indicate its readiness to ease further if damage from last month's earthquake proves bigger than expected.

Putting pressure on the BOJ to do more, latest data showed Japanese factory output fell at a record pace in March.

With the two major central banks keeping interest rates near zero, investors are set to continue using the dollar and yen as funding currencies to buy higher-yielding assets, commodities and equities.

"The reason for the dollar's broad weakness is that market players think it makes sense to use the dollar to fund investment in various assets, since U.S. interest rates are likely to stay low for a while," said Daisuke Karakama, market economist at Mizuho Corporate Bank in Tokyo.

Japan's Nikkei average .N225 rose 1.3 percent, while stocks elsewhere in Asia .MIAPJ0000PUS put on more than 1 percent to hit a new three-year peak.

Trading volume in Japan's stock markets, however, is expected to be thin as the Golden Week holidays loom and as investors awaited earnings from the likes of Panasonic Corp (6752.T) and Honda Motor 7267.t due after the market close.

"If earnings continue to impress the market, the Nikkei may rise further," said Makoto Kikuchi, chief executive officer at Myojo Asset Management.

Japanese markets will be shut on Friday and will reopen on Monday, ahead of more holidays next week.

Also highlighting hefty demand for higher-yielding assets and exposure to fast-growing emerging Asian markets, Indonesia's $2.5 billion medium-term note offering this week was nearly 3 times oversubscribed, with half the issue snapped up by U.S. investors.

The dollar index .DXY, which tracks its performance against a basket of major currencies, fell to as low as 72.878 -- a level not seen since July 2008.

Dealers also said several central banks in Asia were spotted buying the greenback to check sharp gains in their currencies.

The euro rose to a 16-month high of $1.4878, further spurred by stop-loss buying after a breach of option barriers around $1.4800, while the Australian dollar touched a post-float high of $1.0948.

In the commodities market, U.S. crude scaled a 2-1/2 year peak of $113.70 a barrel, and gold futures raced to a record high above $1,530 an ounce. Copper gained nearly 2 percent to around $9,490 a tonne.

U.S. Treasury yields were a touch lower, after having risen on Wednesday as the market made room for an upcoming seven-year supply. The two-year yield slipped 1.2 basis points to 0.6368 percent.

The committee said it may sue Sokol to recover the $3 million of trading profit he made when Berkshire bought chemicals company Lubrizol Corp and could seek damages from him for harm to the company's reputation. The company will cooperate with any government probe in the matter as well.

The U.S. Securities and Exchange Commission is probing Sokol, a person familiar with the matter said on Wednesday.

Sokol's high-profile attorney disputed the board's report and said his client is "a man of uncommon rectitude and probity."

"I have known Mr. Sokol and have represented his companies in business litigation since the mid 1980s," said Barry Levine of the Washington firm Dickstein Shapiro. "He would not, and did not, trade improperly, nor did he violate any fair reading of the Berkshire Hathaway policies."

Levine, who has done work for Sokol's former company MidAmerican Energy, co-heads Dickstein's white collar criminal defense practice and has also represented attempted Ronald Reagan assassin John Hinckley.

The report is an unusual statement from a board that has historically been very close to Buffett, who is CEO and chairman. It may begin to answer the demands of shareholders who expected Buffett to address the controversy at the company's annual meeting in Omaha, Nebraska this weekend.

Buffett previously said he would have nothing further to say about Sokol's actions, a stance that became untenable over time given the intense pressure on the conglomerate.

The report paints a picture of Buffett as having been duped by Sokol. However, one shareholder said it was also crafted to exonerate Buffett from wrongdoing.

"This report makes it clearly look like this was not Warren Buffett's fault, this was Sokol's fault," said Michael Yoshikami, chief executive of wealth manager YCMNET Advisors and a Berkshire shareholder. "There really is an effort here to make clear that this was not Warren Buffett's behavior in any way, this was Sokol's behavior."

GAIN AT RISK

Buffett announced Sokol's resignation in March, noting that Sokol bought shares in Lubrizol before suggesting to Buffett that Berkshire buy the company. While Sokol mentioned to Buffett in "passing" that he held some Lubrizol stock, Buffett said he only later found out that Sokol held nearly 100,000 Lubrizol shares worth about $10 million.

Sokol made a profit of about $3 million -- a gain that could be at risk. The Berkshire board said it was still considering legal action against Sokol to, among other things, recover any trading profits he made.

"It hardly sounds like Berkshire is trying to circle the wagons to protect Sokol," said Francis Pileggi, a partner at Fox Rothschild LP in Wilmington, Delaware. "If I had my druthers, I would rather be representing Berkshire in this matter than Sokol in a Delaware court."

Besides the potential civil recovery, Berkshire's board also said it would cooperate with any government investigation. A spokesman for the Securities and Exchange Commission declined to comment.

Legal experts said Sokol appears to be in more trouble now than was first thought.

"I think Mr. Sokol has a real problem here," said Duke University Law Professor James Cox. "This is not a close call at all."

FALLEN HEIR

Sokol, who used to run Berkshire subsidiaries MidAmerican and NetJets, was widely seen as Buffett's heir apparent, an image Buffett biographers say the "Oracle of Omaha" cultivated.

Yet Sokol, in his one public appearance since the scandal broke, told CNBC he had no aspiration to the job. In Wednesday's statement, Berkshire said Sokol reiterated as much to Buffett before Buffett announced Sokol's resignation.

When Buffett made that announcement, he said he believed Sokol had not done anything unlawful. The statement Wednesday seemed to suggest otherwise.

"His misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor he owed to the company," the board said -- noting that an executive's duty of candor was part of the duty of loyalty under Delaware law where Berkshire is incorporated.

Berkshire's board also said certain answers Sokol gave to Buffett in response to questions about the nature of his holdings appeared "intended to deceive."

In total, the 18-page statement uses variations on the word "violation" some 11 times.

The board's audit committee held three meetings this month to consider the report.

Berkshire attorney Ron Olson said Sokol was interviewed at least three times regarding his Lubrizol trading and contacts with Citigroup Inc bankers. "In connection with the preparation of the audit committee report, a request for a further interview with Mr. Sokol was made to his attorney. Mr. Sokol was not made available," Olson said in the statement.

The audit committee members are chairman Thomas Murphy, 85, and a decades-long Buffett friend; Donald Keough, 84, a former president of key Buffett holding Coca Cola Co; and former Microsoft executive Charlotte Guyman, 54.

Their report is likely to take some pressure off Buffett this weekend when tens of thousands of shareholders descend on Omaha for Berkshire's annual festival-cum-general-meeting.

"One way or another, Mr. Buffett will have to address this. It's conceivable that this release relieves Mr. Buffett from the chore of addressing what is an unpleasant issue," said Jerry Bruni, CEO and portfolio manager at J.V. Bruni and Co, which owns Berkshire shares and has $450 million of assets under management.

Berkshire's actively traded class B shares were flat at $82.99 in after-hours trading.

(Additional reporting by Jonathan Stempel, Moira Herbst, Matthew Goldstein, Dan Wilchins, Alina Selyukh and Jonathan Spicer in New York and Sarah N. Lynch in Washington. Editing by Robert MacMillan)

The Fed trimmed its forecast for 2011 economic growth in a nod to a weak start to the year and bumped up its projections for inflation, which caused some jitters in financial markets.

The central bank's policy-setting committee said after a two-day meeting it will complete the purchase of $600 billion in bonds in June to support the economy's recovery, and said it would keep its balance sheet, currently at $2.67 trillion, steady for a time to ensure its support does not fade.

It also repeated it plans to keep overnight interest rates, which it has held near zero since December 2008, extraordinarily low for "an extended period."

"It is a relatively slow recovery," Bernanke said at a news conference, the first after a policy meeting by a Fed chief in the central bank's 97-year history. "The combination of high unemployment, high gas prices and high foreclosure rates is a terrible combination. A lot of people are having a tough time."

Bernanke appeared nervous at the start of the briefing, held at the central bank's headquarters, but he relaxed as the widely watched, nearly hour-long session progressed.

A hush fell over the normally bustling floor of the New York Stock Exchange with orders drying up as investors tuned into the central bank chief. "It's kind of a novelty," said Kenneth Polcari, managing director at ICAP Equities.

The news conference served multiple purposes for the Fed.

It allowed Bernanke an opportunity to push back against stiff criticism from some lawmakers, economists and foreign officials that the Fed's efforts to prop up the U.S. economy with more than $2 trillion in stimulus would spark inflation.

It was also an opportunity for Bernanke to seize control of an often very public debate among Fed officials over whether the stimulus course could backfire, providing a new tool to deliver a consensus central bank view directly to markets.

"In no way did Bernanke begin laying the groundwork for a near-term reversal in monetary policy," said Michelle Girard, an economist with RBS in Stamford, Connecticut. "The chairman appears watchful but comfortable with the Fed's current stance."

GROWTH LOSING A STEP

In a fresh quarterly forecast, the Fed revised down its growth estimate for 2011 to between 3.1 percent and 3.3 percent from the 3.4 percent to 3.9 percent it saw in January. It said the recovery was proceeding at a "moderate pace," a shift from March when it said it was on "firmer footing."

Bernanke said growth may have slowed to less than a 2 percent annual rate in the first three months of this year after a 3.1 percent advance in the fourth quarter of 2010.

But he added: "I would say that roughly most of the slowdown in the first quarter is viewed by the committee as being transitory." The government releases its first estimate of first quarter GDP on Thursday.

The Fed lowered its projection for unemployment but said it would stay elevated over the central bank's three-year forecast period. The jobless rate stood at 8.8 percent in March.

"The pace of improvement is still quite slow and we are digging ourselves out of a very, very deep hole," Bernanke said.

The central bank sharply raised its estimate for 2011 inflation to account for a surge in oil prices. However, it bumped up its core inflation forecasts only marginally and expressed confidence the jump in the cost of oil would not spark broader inflation.

Financial markets showed some nervousness. Prices for 30-year U.S. government debt hit session lows on the inflation forecasts, while the price of gold -- a traditional inflation hedge -- hit a record high of almost $1,530 an ounce.

The U.S. dollar reached a three-year low against six major currencies as Bernanke spoke. Stock markets, which have been pumped up by the Fed's monetary easing, rose on the expectation that the central bank's support will continue.

Interest rate futures showed traders continued to bet that the Fed would hold off on raising rates until early 2012.

CALLED OUT ON DOLLAR

Bernanke faced broad questioning, including on the falling value of the dollar, which has been undercut by the Fed's easing as other major central banks raised interest rates.

While deferring to currency policy as an issue for the Treasury Department, Bernanke said a strong, stable dollar was in the interests of the United States and the world economy.

To keep its balance sheet from shrinking, the Fed said it will continue to reinvest proceeds from maturing securities it holds, ensuring it would remain a big buyer in debt markets.

Bernanke said a decision to stop that strategy would likely be the first step of a policy tightening, although he offered no timeframe on when that might occur.

As for an increase in interest rates, he suggested that was still some months off. "Extended period suggests that there would be a couple of meetings before action but unfortunately ... we don't know how quickly a response will be required."

Bernanke told a questioner that the trade-off between the benefits of extending the bond-buying program and the potential for wider inflation had become less attractive.

"Inflation has been getting higher, inflation expectations are a bit higher," he said. "It's not clear we can get substantial improvements in payrolls without some additional inflation risks."

(Additional reporting by Kristina Cooke and Caroline Valetkevitch; Writing by Mark Felsenthal and Glenn Somerville; Editing by Tim Ahmann and William Schomberg)

The Fed's policy-setting Federal Open Market Committee said in a statement after a two-day meeting it intends to complete its $600 billion bond buying program in June as scheduled.

Despite some headwinds, the U.S. central bank indicated that it believed the economic recovery was proceeding at a moderate pace, with little risk an inflationary psychology would take hold.

"Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued," it said.

The statement is expected to be overshadowed within hours by a question and answer session Fed Chairman Ben Bernanke will hold with journalists. The briefing, which is set for 2:15 p.m. (1815 GMT), marks the first regularly scheduled news conference by a Fed chairman in the central bank's 97-year history.

The Fed cut interest rates to near zero in December 2008 and bought close to $1.4 trillion in longer-term securities to help spur a recovery from the economy's deep recession.

When the recovery stumbled last year, it launched a new program to buy an additional $600 billion in government bonds.

The bond-buying plan met withering criticism domestically and internationally. Even some Fed officials have worried it would stoke inflation.

The Fed's unprecedented easy money policies have been accused of pushing up the cost of oil and other commodities. Top Fed officials have defended their actions by saying surging commodity costs primarily reflect rapid growth in emerging markets and that a healthy U.S. economy has global benefits.

The Fed lags other major central banks, including the European Central Bank, that have already moved to raise interest rates or are poised to do so.

This out-of-step U.S. monetary policy has undercut the dollar, which slid to a three-year low against major currencies on Wednesday. Analysts expect the greenback to remain under pressure.

Several Fed officials have expressed concern the central bank risks falling behind the curve in responding to price pressures if it does not reverse its ultra-loose stance soon.

Although headline inflation has shot higher since the start of the year, core price indexes closely monitored by the Fed are still well below levels that would normally cause alarm.

At the same time, higher commodity costs have weighed on consumer spending and the unemployment rate is still at a lofty 8.8 percent.

Analysts polled by Reuters expect a report on Thursday to show the economy advanced at a subdued 2 percent annual rate in the first quarter, if not slower. It expanded at a solid 3.1 percent pace in the final three months of last year.

The world's largest aerospace and defense company said on Wednesday its first-quarter profit came to $586 million, or 78 cents per share, compared with $519 million, or 70 cents per share, a year earlier when the company took a 20 cents-per-share charge related to health care legislation.

Analysts on average expected Boeing to report a first-quarter profit of 70 cents per share, according to Thomson Reuters I/B/E/S.

Revenue slipped 2 percent to $14.9 billion.

Boeing, which competes with EADS unit Airbus, splits its business almost evenly between commercial airplanes and defense products.

Boeing Commercial Airplanes first-quarter revenue decreased by 5 percent to $7.1 billion on planned lower 777 deliveries.

Boeing repeated that first delivery for the long-delayed 787 Dreamliner was on track for the third quarter.

Boeing Defense, Space & Security's first-quarter revenue was $7.6 billion, in line with the year-ago quarter.

Its shares were up 55 cents at $76.10 in premarket trading.

(Reporting by Kyle Peterson; Editing by Derek Caney)

At 12:30 p.m. ET, the Federal Open Market Committee will release a statement on the interest rate policy. In a Reuters poll, dealers expect the fed funds rate will remain in the 0.0 percent to 0.25 percent range. Federal Reserve Chairman Ben Bernanke will hold media briefing at 1815 GMT.

Bernanke will likely use his first-ever news conference on monetary policy to hammer home the case for a patient approach to withdrawing the central bank's extensive support for the U.S. economy. He will face the press in the first regularly scheduled news conference by a Fed chairman in the central bank's 97-year history.

The dollar fell broadly, marking a fresh nadir against the Swiss franc and a 29-year trough against the Australian dollar. Crude oil prices also declined as investors awaited details of the Fed's assessment of the economy.

Major companies reporting results include Boeing (BA.N), Whirlpool (WHR.N), eBay (EBAY.O), Corning (GLW.N) and WellPoint (WLP.N).

At 1230 GMT, Commerce Department releases March durable goods orders. Economists expect a 2.0 percent increase in orders versus a 0.6 percent drop in February.

Johnson & Johnson (JNJ.N) is to buy Swiss medical devices maker Synthes Inc (SYST.VX) for 19 billion Swiss francs ($21.59 billion) in its largest ever buy, boosting its surgical business and reshaping the wider industry.

Mortgage Bankers Association releases at 1100 GMT Weekly Mortgage Market Index for the week ended April 22, versus the prior week. The mortgage market index read 467.5 and the refinancing index was 1,975.2 in the previous week.

Nasdaq OMX Group (NDAQ.O) and IntercontinentalExchange Inc (ICE.N) appealed directly to NYSE Euronext (NYX.N) stockholders on Tuesday, asking them to press the Big Board's directors to sit down to talk about their joint bid.

Federal Reserve Bank of Chicago releases at 1230 GMT its Chicago Fed Midwest Manufacturing Index for March. The index read 83.3 in the prior month.

News Corp (NWSA.O) is expected to receive bids for Myspace by the end of this week, according to a person familiar with the matter.

At 1500 GMT, Labor Department issues annual revisions to Employment Cost Index.

Shares in Amazon (AMZN.O) briefly turned higher in after-hours trade on Tuesday after it posted results. Costco (COST.O) was up 0.8 percent after the company announced late on Tuesday the expansion of its stock repurchase program and an increase in its quarterly cash dividend.

Tokyo stocks .N225 gained 1.4 percent after a batch of Japanese and U.S. corporate earnings came in better than expected, but the FTSEurofirst 300 .FTEU3 index of top European shares fell 0.2 percent.

On Tuesday, the Dow Jones industrial average .DJI, the Standard & Poor's 500 Index .SPX and the Nasdaq Composite Index .IXIC rose 0.8 to 0.9 percent. (Reporting by Atul Prakash; Editing by Louise Heavens)

While Fed chairman Ben Bernanke is expected to paint a cautious picture on the world's largest economy, Asian and Latin American central banks by contrast are still tightening monetary policy and some are using currency appreciation to check price pressures.

The European Central Bank raised its policy rate this month for the first time since mid-2008 and is expected to raise rates at least once more this year.

That has given new legs to the "carry trade", in which investors borrow in a low-yielding currency to invest in higher-yielding assets or currencies.

Investors have been snapping up the high-yielding Australian dollar and South Korean shares .KS11, while showing heavy interest in Indonesia's upcoming dollar bond.

Market players also added to bearish dollar bets, especially against the euro and the Swiss Franc, on expectations the Fed will cling to a near-zero interest rate policy even as it lets a $600 billion bond purchase program wind down in June.

"Focus will be on the inaugural press conference and whether Bernanke is shifting along the dove-hawk scale," said Michael Sneyd, analyst at Societe Generale.

"Attention will also be on comments for how the Fed may respond to U.S. fiscal tightening. All-in-all, the meeting is likely to give the green light for risk appetite and for dollar bears to continue to be bearish."

The dollar index .DXY, which tracks its performance against a basket of major currencies, hit the lowest since August 2008 at 73.483, before cutting some losses.

FLOWS PICK UP

Asian shares rose after robust gains posted by U.S. indices overnight, driven by better-than-expected performances from U.S. corporate heavyweights. U.S. stock futures rose 0.1 percent, suggesting a higher open on Wall Street.

South Korea's benchmark KOSPI index .KSII rose to a record high for the third consecutive session before giving back some gains as investors took profits on automaker shares. It ended flat. Hong Kong shares .HSI rose, boosted by a broad rally in financials ahead of results from Chinese banks.

MSCI's index of Asia Pacific shares outside Japan .MIAPJ0000PUS rose to its highest level since January 2008, and was up 0.5 percent on the day.

Japan's Nikkei .N225 closed up 1.4 percent, supported by rebounding shares of large exporters. But it could face downward pressure after ratings agency Standard & Poor's revised its outlook on Japan's sovereign debt to negative.

Offshore flows into non-developed Asian markets have picked up after a January slump, with both emerging markets equity and bond fund groups extending their longest inflow streaks since mid-January, according to fund tracker EPFR Global.

The order book for Indonesia's eagerly awaited 10-year dollar-denominated bond has grown to around $5 billion for an issue expected to be between $1 billion to $1.5 billion in size, IFR said. Indonesia's markets have been a favorite among global investors because of the country's relatively high yields, decent economic growth and demographics.

China let the yuan rise to a post-2005 revaluation high, triggering gains in emerging Asian currencies.

Helping the case of carry trades, the Australian dollar shot to a new 29-year peak above the $1.0800 per U.S. dollar after higher-than-expected first quarter inflation suggested the central bank will eventually have to resume tightening.

SILVER PULLBACK

The dollar's woes have been further compounded by a recent drop in U.S. Treasury yields as rate traders bet that any Fed tightening would be a slow and gradual process.

In Asian time, the U.S. 10-year note yield was at 3.32 percent, just above a one-month low of 3.31 percent before the Fed decision. Ten-year yields are down by about 30 basis points since this month's highs.

In commodity markets, spot silver bounced 0.9 percent to around $46 per ounce level after falling by nearly 5 percent overnight. High volatility and the expiry of U.S. silver options added to the intensity of the decline of the precious metal.

Despite the sharp pullback in silver which rippled over into other commodities, Brent held above the $124 per barrel line, as Libya's civil war and violence-tinged unrest Syria and Yemen helped limit bearish sentiment on a price slide.