The dollar hovered around three-year lows on Friday and looked set to come under further pressure next week, while a stronger yen weighed on Tokyo stocks in holiday-thinned Good Friday trade.

Gold hit a fresh all-time high of $1,509 an ounce, extending its record-breaking rally to a sixth session, as the weaker dollar prodded investors toward assets less reliant on the U.S. economy.

The dollar index <.DXY> was steady at 73.99 against a basket of major currencies after slipping to its lowest since mid-2008 on Thursday, weighed down by expectations that the Federal Reserve will keep interest rates at record lows for some time to come and by bitter divisions in Washington over how to slash the gaping budget deficit.

Analysts said it could extend recent losses next week, with all eyes now on its record low of 70.698 struck in March 2008.

The biggest reason behind the fall is waning investor confidence in U.S. assets. The market is waking up to the fact that fiscal problems are not limited to euro periphery countries, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp in Japan. ID:nL23389078]

Trade was expected to remain thin into early next week with most markets around the world closed from Friday through Easter Monday.

Japan's Nikkei-225 share average <.N225> ended down 0.04 percent but pared initial losses after news that Renesas Electronics <6723.T.>, a major chip supplier to the auto industry, would resume operations at an earthquake-hit factory earlier than expected

Tokyo stocks had slipped in early trade as dollar weakness boosted the value of the yen.

In Seoul, one of the other few Asian markets open on Friday, the Korea composite Stock Price Index <.KS11> edged down 0.03 percent, while Shanghai <.SSEC> fell 0.7 percent, shrugging off gains in U.S. markets overnight.

Wall Street posted its first positive week in three as healthy earnings news boosted the Dow Jones industrial average by 0.42 percent, though gains were offset by the fact that 180 S&P names were due to report financial results next week. <.N>

DOLLAR WOES

Adding to pressure on the dollar, data overnight showed the U.S. economy was struggling to regain momentum.

Factory activity in U.S. Middle Atlantic states slowed sharply in April, new jobless claims fell less than expected and other reports showed steep declines in home prices in February.

Data next week is expected to show U.S. growth slowed significantly in the first quarter.

China's yuan hit another record high, trading at 6.5096 to the dollar in early afternoon as the central bank fixed its mid-point at an all-time high.

Like many other Asian governments this year, Beijing appears to have decided to allow more gains in its currency to help tame imported inflation.

But analysts discounted any notion that the People's Bank of China would oversee a one-off currency revaluation as it did in July 2005, a move that could hurt exporters and place huge pressure on the government.

Oil prices also remained high, with the weaker dollar attracting more buying. U.S. Crude oil futures ended higher for the third straight day on Thursday and Brent crude stood at just over $124 a barrel.

China Japan Gold