Euro burns past $1.20 as ECB signals stimulus slowdown

By Hilary Russ

NEW YORK (Reuters) - The euro surged on Thursday after the European Central Bank indicated it was preparing to scale back its stimulus program, while gold rose to a one-year high after the U.S. dollar tumbled on weak U.S. jobs data.

Traders were left waiting after the ECB's initial statement from its policy meeting reaffirmed its ultra-easy stance, but leapt on the euro as ECB head Mario Draghi said the central bank was looking at how to wind down its 60 billion-euro-a-month buying program. The bank kept its growth and inflation outlooks unchanged.

"We will be ready for much of what we have to decide (to scale back stimulus) by October," Draghi said at the ECB's post-meeting news conference. "Right now, judging the way the world is going, we should be ready."

The euro jetted to a nine-day high of $1.2059. It was last up 0.86 percent at $1.2018.

"Policy makers are concerned about the strong and rapid appreciation that the currency has experienced," said Craig Erlam, Senior Market Analyst at Oanda in London. "The failure to make a new high is a sign of an overheated market."

Key world stock markets climbed, while European stocks saw their day's gains halved at the prospect of ongoing euro strength.

The pan-European FTSEurofirst 300 index rose 0.25 percent and MSCI's gauge of stocks across the globe gained 0.33 percent

The price of gold rose to a one-year peak after the dollar tumbled on the back of weak U.S. jobs data and unchanged expectations for growth and inflation from the European Central Bank.

Spot gold added 1.1 percent to $1,348.00 an ounce. U.S. gold futures gained 1.05 percent to $1,353.00 an ounce.

Markets benefited from relief that U.S. Congress struck a deal on the country's debt limit and that there had been no further ratcheting up of the North Korea crisis in Asia. However, the U.S. stock market fell after a flat start with Hurricane Irma on track to hit Florida by the weekend. [.N]

The Dow Jones Industrial Average fell 40.59 points, or 0.19 percent, to 21,767.05, the S&P 500 lost 3.14 points, or 0.13 percent, to 2,462.4 and the Nasdaq Composite added 5.22 points, or 0.08 percent, to 6,398.54.

Stocks were also damped down by a Labor Department report that showed the number of Americans filing for unemployment benefits jumped to its highest level in more than two years last week amid a surge in applications in hurricane-ravaged Texas.

The dollar index fell 0.82 percent.

Asia in contrast had been mildly risk-on overnight.

China's yuan rose past the psychologically important 6.5 per dollar level for the first time since May 2016.

MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.65 percent higher, while Japan's Nikkei rose 0.20 percent.

In commodities, oil markets looked to the reopening of U.S. Gulf Coast refineries after sharp falls caused by Hurricane Harvey, while potential disruptions to crude shipments because of Hurricane Irma loomed. [O/R]

U.S. crude fell 0.45 percent to $48.94 per barrel and Brent was last at $54.11, down 0.17 percent on the day.

Irma, ranked as one of the five most powerful Atlantic hurricanes in the last 80 years, killed eight people on the Caribbean island of Saint Martin, left Barbuda devastated on Thursday and was expected to reach Florida at the weekend.

($1 = 0.8378 euros)

(Additional reporting by Marc Jones, Eric Onstad and Ahmad Ghaddar in London; Editing by Bernadette Baum)