By Rafael Nam

The U.S. dollar edged higher on Friday, but still headed for its biggest weekly fall in 24 years on fears it will lose its status as the world's reserve currency, while oil prices ceded ground after a recent rally.

U.S. Treasuries were steady in Asian trade after yields on Wednesday recorded their biggest single-day drop since the 1987 market crash on the Federal Reserve's surprise announcement it will purchase $300 billion in longer-dated U.S. government debt.

Asian stocks fell but looked set to gain for a second consecutive week -- marking their best weekly back to back gains since mid-December -- as the Fed's plan to inject a combined $1.15 trillion into the U.S. financial system improved battered confidence in the banking sector.

The Fed this week has tackled head-on the woes afflicting the world's largest economy, but the approach has also created uncertainties, mainly in the form of a weakening dollar and prospects of surging inflation once the economy starts recovering.

This is a historic moment, the start of debasement of the world's reserve currency, and it feels to many participants that in the grand sweep of history we are witnessing the end of 'Rome' on the Potomac, said Alan Ruskin, a RBS strategist in Greenwich.

The Fed's massive expansion of its balance sheet could lead to an oversupply of the U.S. dollar and erode the safe-haven appeal that just earlier this month had sent the currency to a three-year high against a basket of currencies, analysts said.

In a day in which Tokyo markets were closed for a public holiday, the U.S. dollar index <.DXY> gained 0.2 percent to 83.239 in early Asian trade, after falling as far as 82.631 on Thursday to mark a 10-week low.

The dollar is still headed for a loss of around 5 percent for the week against the basket of major currencies -- the steepest fall since 1985 when major economies agreed to a formal depreciation of the dollar in the Plaza Accord.

U.S. dollars will be flooding the world as the printing presses work overtime, said Stephen Koukoulas, a strategist at TD Securities in London in a note to clients.

Bye bye U.S. dollar. Sell sell U.S. dollar!

The fall in the dollar has sent the euro to its biggest weekly increase since its inception in 1999. On Friday the euro was resting at $1.3655, having climbed to about a two-month peak of $1.3737 in New York.

The specter that central banks will overdo in their fight against falling prices, causing a big comeback of inflation, is another concern.

The Fed's aggressive unconventional policy measures have again pushed the central bank's balance sheet above $2 trillion, according to data released on Thursday.

U.S. Treasuries steadied in Asian trade after yields dropped by the most in nearly 22 years after the Fed's decision.

The 10-year yields were steady at 2.61 percent, having collapsed from 3.01 percent just before the Fed announced its new plans on Wednesday and 2.90 percent at the end of last week.

Two-year yields were holding at 88 basis points, compared to 1.03 percent before the Fed's move.

Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> lost 0.9 percent on Friday though the index is headed for its second consecutive weekly gain, bringing its advance for the month of more than 9 percent.

Though regional banks have gained during that period, there is plenty of concerns to keep optimism in check.

For export-dependent Asia, chief among them is the status of global trade, while falls in the dollar could spark gains in local emerging currencies just when manufacturers in the region are facing a bleak prospect.

The global economy will shrink as much as 1 percent this year -- its first contraction since World War Two -- the International Monetary Fund warned on Thursday, urging quick action to deal with problem assets on banks' balance sheets.

Prices for commodities rallied this week as the weakening dollar made them cheaper for overseas investors, while others looked for a hedge against potential inflation.

Still, oil prices dipped 56 cents to $51.04 a barrel after a day earlier surging more than 7 percent to top the $51 a barrel mark.

Gold also eased to $951.40 an ounce from New York's notional close of $958.60 after on Thursday rising to its highest in nearly three weeks as investors