NEW YORK (Reuters) - The euro had its worst day against the dollar in 16 months on Thursday after the European Central Bank began weaning the euro zone off loose monetary policy, while U.S. Treasury yields rose slightly, hurt by weak demand at an auction of 7-year notes.
The dollar index .DXY rose 0.99 percent, with the euro EUR= down 1.35 percent to $1.1653 after the ECB said it would cut its bond purchases in half to 30 billion euros a month from January. However, it hedged its bets by extending asset purchases by nine months given low inflation.
“Overall, the ECB’s focus on a very cautious and drawn-out tapering process that avoids pushing the euro higher was clearly more dovish than markets had been expecting,” said James Chen, head of research at Gain Capital.
Benchmark 10-year U.S. Treasury notes US10YT=RR last fell 5/32 in price to yield 2.4609 percent, from 2.444 percent late on Wednesday.
The 30-year bond US30YT=RR last fell 10/32 in price to yield 2.9706 percent, from 2.955 percent late on Wednesday.
Yields fell earlier in the session, in line with the euro zone bond market, after the ECB’s meeting.
A report from Politico saying that current Federal Reserve Chair Janet Yellen was out of the running for the top U.S. central bank job briefly nudged rates higher. But a White House official told Reuters: “No final decision has been made.”
Yields weakened later in the day after a soft auction of U.S. 7-year notes drew the weakest demand since August last year.
The U.S. 7-year note was sold at 2.280 percent, higher than the expected yield at the bid deadline. The yield was the highest at an auction for this debt maturity since January.
Gold dipped as the dollar gained against the euro after the ECB decision to trim bond purchases as it hedged that move by also extending the lifespan of its bond-buying program.
Spot gold XAU= dropped 0.8 percent to $1,267.01 an ounce.
On Wall Street, the Dow Jones Industrial Average and the S&P 500 closed higher, boosted by upbeat corporate results on one of the busiest days of third-quarter earnings. Seventy-four percent of 231 S&P companies have beat profit expectations as of Thursday.
The Dow .DJI rose 71.4 points, or 0.31 percent, to 23,400.86, the S&P 500 .SPX gained 3.25 points, or 0.13 percent, to 2,560.4 and the Nasdaq Composite .IXIC dropped 7.12 points, or 0.11 percent, to 6,556.77.
Ford Motor Co (F.N) reported a better-than-expected quarterly net profit, driven largely by U.S. sales of its high-margin pickup trucks. It said it would begin to test self-driving cars in some cities next year. The company’s shares were up 1.9103 percent.
Twitter’s (TWTR.N) shares rose 18.4947 percent. The social network company said it could turn its first ever profit in the fourth quarter, after making cost cuts and finding new revenue sources. The social network company said it could turn its first-ever profit in the fourth quarter, after making cost cuts and finding new revenue sources.
Nike (NKE.N) and holding company DowDuPont DWDP.N both lifted the Dow, with shares up 3.4 percent and 2.8 percent, respectively.
Market gains were curbed, however, by a drop in the healthcare sector.
Celgene shares, which dropped 16.4 percent, dragged on the S&P 500 and the Nasdaq Composite after the biopharmaceutical company reported disappointing sales for its psoriasis treatment drug Otezla.
European equities were boosted by the weaker euro after the ECB's meeting. The pan-European FTSEurofirst 300 index closed .FTEU3 up 1.07 percent.
Japan's Nikkei .N225 rose 0.15 percent.
Brent crude closed at a 27-month high as the market focused more on comments from Saudi Arabia about ending a global supply glut instead of an unexpected increase in U.S. crude inventories and high U.S. production and exports.
U.S. crude CLcv1 rose 1.11 percent to $52.76 per barrel and Brent LCOcv1 was last at $59.49, up 1.8 percent on the day.
Additional reporting by David Ingram in San Francisco, Pushkala A and Sruthi Shankar in Bengaluru, Nick Carey and Paul Lienert in Detroit,; Richard Leong, Scott DiSavino and Gertrude Chavez-Dreyfuss in New York,; Abhinav Ramnarayan, Fanny Potkin in London; Editing by Nick Zieminski and Dan Grebler