Euro sags to 11-1/2-year low, bonds rise after ECB

By Richard Leong

NEW YORK (Reuters) - The euro fell to an 11-1/2-year low against the dollar on Thursday as U.S. and euro zone bond prices rose, after the European Central Bank spelled out its 1 trillion-euro stimulus plan that begins next Monday.

European stock prices were supported by the ECB's latest effort to jump-start the struggling euro zone economy, while U.S. equities were little changed as investors awaited direction from the government's monthly labour report due out on Friday.

ECB President Mario Draghi outlined the central bank's quantitative easing programme at a press conference following a scheduled policy meeting. He left the door open for more bond purchases beyond September 2016.

"Mr. Draghi is showing that the ECB is determined to continue until it gets the results it needs. They are perfectly aware that they cannot afford to fail," said Mauro Vittorangeli, a senior fixed income portfolio manager with Allianz Global Investors in Paris.

The ECB upgraded its growth outlook for the euro zone to 1.5 percent for 2015. That still trails a 2.8 percent pace seen for the United States. [ID:ID:nL5N0W72KX]

Brent oil prices hovered near $61 a barrel in the absence of a deal with world powers on Iran's nuclear program. An agreement could loosen restrictions on Iran to sell its oil, exacerbating a global supply glut.

The rise in European stock prices was limited by the prospect of an economic slowdown in China, with mining companies falling on the outlook.

Beijing announced a 7 percent growth target for the year and signalled that the lowest rate of expansion for a quarter of a century is the "new normal."

The euro (EUR=) slumped below $1.100 for the first time since September 2003. It was last down 0.6 percent at $1.1014. Against the yen, it was down 0.1 percent, at 132.38 yen (EURJPY=).

In contrast, the dollar strengthened to an 11-1/2-year peak against a basket of currencies ahead of Friday's U.S. payrolls report. If the data shows further improvement in wages and job growth, it will reinforce an expectation that the U.S. Federal Reserve will raise interest rates later this year. (ECONUS)

The dollar index (.DXY) was up 0.5 percent at 96.437.

Euro zone bond prices rose, while U.S. debt prices held steady. Benchmark 10-year U.S. yield was 2.12 percent, while its Italian and Portuguese counterparts and slipped to record lows. [US/] [GVD/EUR]

The Dow Jones industrial average (.DJI) was up 1.22 points, or 0.01 percent, to 18,098.12, the S&P 500 (.SPX) was down 1.45 points, or 0.07 percent, to 2,097.08, and the Nasdaq Composite (.IXIC) was up 0.50 points, or 0.01 percent, to 4,967.64.

The pan-European FTSEurofirst 300 index (.FTEU3) ended up 0.8 percent at a seven-year high, while Tokyo's Nikkei (.N225) closed up 0.3 percent. [.EU] [.T]

The MSCI world equity index , which tracks shares in 45 nations, edged up 0.03 percent at 429.31.

Brent crude (LCOc1) was last up 18 cents, or 0.3 percent, at $60.73 a barrel. U.S. crude (CLc1) was last down 22 cents, or 0.43 percent, at $51.31. [O/R]

Spot gold prices (XAU=) rose $1.2 or 0.10 percent, to $1,200.65 an ounce. [GOL/]

(Editing by Leslie Adler)