NEW YORK (Reuters) - The euro fell to a four-month low against the U.S. dollar on Thursday and the greenback rose to its highest in seven months against a basket of major currencies after the European Central Bank President left the door open to more monetary stimulus.
The rise in the U.S. dollar knocked down oil prices which are traded in dollars and pressured U.S. stock prices as many leading companies are dependent on international sales.
The ECB left its ultra-loose monetary policy unchanged but president Mario Draghi kept a wide range of options open for further stimulus in December, shooting down any talk of tapering its 1.7 trillion euro asset-buying program.
The U.S. dollar gained further after publication of a stronger-than-expected U.S. existing home sales report.
"The move in the dollar hurt oil, which hurt energy, which hurt stocks," said Stuart Guilfoyle, chief market economist at Stuart Frankel & Co.
Crude oil prices fell around 2.5 percent, also weighed by profit taking. A strong rally on Wednesday had taken prices to their highest in 15 months in the wake of unexpected inventory drawdowns.
U.S. stocks were also pushed lower by weak earnings reports from index heavyweights such as Verizon <VZ.N> and insurer Travelers <TRV.N>. Telecom stocks were the worst-performing sector, down 2 percent and set for their worst one-day percentage drop in just over one month.
The Dow Jones industrial average <.DJI> fell 21.57 points, or 0.12 percent, to 18,181.05, the S&P 500 <.SPX> lost 2.62 points, or 0.12 percent, to 2,141.67 and the Nasdaq Composite <.IXIC> dropped 9.01 points, or 0.17 percent, to 5,237.40.
A measure of world equity markets <.MIAPJ0000PUS> was last down 0.15 percent after touching a fresh one-week high following Draghi's comments.
European equities jumped following Draghi's remarks with the pan-European STOXX 600 index <.STOXX> rising more than 1.0 percent from its lows before closing up 0.19 percent.
DRAGHI DRAGS DOWN EURO
The euro fell as low as $1.0917 versus the U.S. dollar, its lowest since June 24, helping the dollar index <.DXY> rise to its highest since March 10.
“Draghi pushed back strongly against the idea that they could discuss tapering or adjusting QE and that weighed on the euro,” said Vassili Serebriakov, FX strategist at Credit Agricole in New York.
The ECB head's comments also weighed on longer-dated U.S. Treasury prices, which dipped modestly. Benchmark 10-year notes <US10YT=RR> were last down 1/32 in price to yield 1.749 percent.
The Mexican peso climbed to a six-week high in the immediate aftermath of the U.S. presidential debate between Republican Donald Trump and Democrat Hillary Clinton on Wednesday, but fell back in morning trade. The peso was last down 0.4 percent to 18.658 per dollar <MXN=D4>.
The peso is seen as the chief proxy for market pricing of the Republican candidate's chances in view of his promises to impose tough limits on immigration and rewrite trade deals.
“The early polls suggest Clinton was once again the winner here and so the Mexican peso has been one of the most obvious beneficiaries," said James Athey, fixed income investment manager at Aberdeen Asset Management.
"The magnitude of the move, however, suggests that the market has largely concluded that Trump won’t win. That doesn’t mean that the result is a foregone conclusion. Markets, pollsters and pundits all predicted the wrong result in the UK’s referendum on EU membership. That should act as a cursory lesson now."
(Reporting by Dion Rabouin; Additional reporting by Karen Brettell in New York and Patrick Graham in London; Editing by Nick Zieminski)