CORRECTED-GLOBAL MARKETS-Dollar soars and Wall Street gains as ECB holds off on rate hikes

NEW YORK (Reuters) – The U.S. dollar rose more than a penny against a basket of major currencies as the euro cratered, and U.S. stocks closed higher on Thursday, as the European Central Bank signaled interest rate hikes were a long way off.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., June 4, 2018. REUTERS/Lucas Jackson

The bank’s unexpectedly dovish decision overshadowed its statement that it aimed to wrap up its crisis-era stimulus program at the end of this year.

The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the program.

Investors, though, seized on comments indicating that interest rates would stay at record lows at least through the summer of 2019, and some analysts believed it may be longer, with ECB President Mario Draghi’s term due to expire at the end of October 2019.

The U.S. Federal Reserve on Wednesday decided to raise rates by a quarter of a percentage point, creating “a widening rate differential between the U.S. and Europe, and the dollar is the beneficiary,” said Ed Egilinsky, head of alternative investments at Direxion in New York.

The euro EUR= marked its steepest one-day drop against the U.S. dollar since June 2016, and was down 1.75 percent at $1.1583.

The dollar index .DXY, which measures the greenback against six other top currencies, rose 1.17 percent.

Ten-year government bond yields in Germany, the euro zone benchmark, fell around 6 basis points to 0.422 percent compared with Wednesday’s close DE10YT=RR.

Oil markets, pressured by the strengthening dollar and fears that OPEC countries could decide to increase output at a meeting next week, ended mixed.

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