* Asia stocks ex-Japan set for best week since July
* Nikkei closes down, logs loss for the week
* European stocks expected to open flat to slightly lower
* Dollar sluggish on Fed’s slower-than-expected rate rise path
* Euro touches 5-1/2-week high on Dutch election result
By Nichola Saminather
SINGAPORE, March 17 (Reuters) - Asian stocks advanced on Friday and looked set for their best week since July, while the dollar extended a slide that began after the Federal Reserve indicated it was unlikely to speed up monetary tightening.
Financial spreadbetters predicted a muted start to European stocks after Thursday’s strong gains, with Britain’s FTSE and Germany’s DAX expected to open 0.1 percent lower and France’s CAC 40 seen starting the day flat.
The dollar index, which tracks the greenback against a basket of six trade-weighted peers, retreated 0.2 percent to 100.18. It hit a five-week low on Thursday, and is down 1 percent for the week.
The dollar was steady at 113.32 yen but is on track to post a 1.2 percent loss for the week.
While the Fed raised interest rates by 25 basis points on Wednesday as widely expected, it kept its original forecast of three rate hikes this year, disappointing investors who were expecting a bump up to four after a string of upbeat U.S. economic data.
U.S. Treasury yields, which slid after the decision, staged a recovery on Thursday and continued to rise on Friday.
The 10-year yield was at 2.5313 percent, from its last close of 2.524.
“The story in global markets over the past 24 hours has centred on a broad-based tightening of monetary policy conditions (and the perception of future tightening),” Chris Weston, chief market strategist at IG in Melbourne, wrote in a note.
Markets are also keeping an eye on the Group of 20 finance leaders’ meeting in Germany this weekend, where topics including protectionism, exchange rates and reforms to boost economic growth are expected to be on the agenda.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 percent and were on track to end the week with a 3.5 percent gain, its biggest increase since the week ended July 15.
Japan’s Nikkei closed down 0.45 percent, ending the week with a 0.4 percent loss.
Chinese stocks slipped 0.6 percent as investors sought more evidence of a sustainable economic recovery, but indexes were set for a 1 percent increase for the week.
Hong Kong’s Hang Seng index touched its highest level since August 2015 on Friday. While up only marginally on the day, it was on track for a 3.2 percent gain for the week, its biggest since September.
MSCI’s all-country world stock index held near Thursday’s all-time high on Friday, on track to end the week 1 percent higher.
Overnight, Wall Street was subdued following strong gains after the Fed’s rate decision. The Nasdaq was flat, while the Dow and the S&P 500 posted losses.
But European shares were upbeat following the election victory of Dutch Prime Minister Mark Rutte, who defeated anti-immigration, anti-European Union rival Geert Wilders.
“Shares remain vulnerable to a short-term pull-back as investor sentiment towards them is very bullish and a lot of good news has been factored in – but there is a risk that any pullback may not come until seasonal weakness kicks in around May,” Shane Oliver, head of investment strategy at AMP Capital, wrote in a note.
The euro, which touched its highest level in 5-1/2-weeks early on Friday, hovered near that level at $1.0773, after two days of strong gains. It is set to end the week up 0.9 percent.
Sterling was steady at $1.2358. On Thursday, it jumped to a two-week high after a decision by the Bank of England to hold interest rates steady, while hinting it might raise them soon.
In commodities, oil prices rose slightly, supported by a weaker dollar.
U.S. crude climbed almost 0.2 percent to $48.84 a barrel, and looked set to end the week 0.7 percent higher.
It touched its lowest level in 3-1/2 months early this week on concerns about a supply glut in the United States, but data on Wednesday showing a small decline in stockpiles there helped lift prices.
Global benchmark Brent added almost 0.1 percent to $51.77 a barrel, and was headed for a 0.8 percent weekly gain.
Gold edged up 0.1 percent to $1,227.8101 an ounce. It was poised to gain 1.9 percent for the week, its first in three, driven by the Fed’s more moderate monetary policy stance. (Editing by Simon Cameron-Moore and Kim Coghill)