Euro tumbles though $1.09 as ECB bond-buying nears

The euro tumbled through the $1.09 level to strike a fresh 11.5-year low Friday as the ECB nears the launch of its massive stimulus package and strong US jobs data raises the possibility of a US rate hike soon.

The single currency sank to $1.0871 -- the lowest since September 2003 -- after strong non-farm payrolls data increased expectations that the US Federal Reserve may move to begin hiking interest rates in the coming months.

But with the ECB to begin its 1.1-trillion-euro quantitative easing stimulus on Monday, eurozone stock markets pushed higher.

Frankfurt's benchmark DAX 30 index of top companies gained 0.33 percent to 11,541.59 points and the CAC 40 index in Paris won 0.10 percent compared with Thursday's close to 4,967.34 points .

On the downside, London's FTSE 100 fell 0.50 percent to 6,926.31 points, having posted a record closing high on Thursday after the ECB announced its bond purchases will begin Monday.

The euro tanked against the dollar after the US Labor Department said Friday that the US economy pumped out a stronger-than-expected 295,000 net new jobs in February.

Analyst Craig Erlam said the good jobs numbers "will only feed into expectations for a rate hike from the Federal Reserve in June."

"The rally in the dollar immediately after the release clearly supports this view...," he added.

Higher interest rates will make the dollar attractive, while the ECB's stimulus programme will flood the economy with euros and weaken its value.

- ECB throws 'kitchen sink' -

Some analysts predict the eurozone unit could reach parity against the dollar amid a growing policy divergence between the ECB and the Fed.

The Frankfurt-based central bank is battling deflation risks across the 19-nation eurozone, while its US counterpart exited its own QE program in October, and is mulling an interest rate hike later this year amid optimism over the American economy.

"Diverging policy stances between the Fed and ECB look set to persist for some time, pushing the euro towards parity over the medium-term as the search for yield drives euro area investors to increase exposure to overseas assets," RIA Capital Markets analyst Nick Stamenkovic told AFP.

However, Rabobank analyst Jane Foley cautioned that the Fed was mindful of weak US inflation.

"The ECB has indicated that it is prepared to throw the kitchen sink in with its attempts to beat deflationary risk and the resultant weakness of euro/dollar will undoubtedly help with the policy?s success."

She added: "We do not think that the Fed will hike (rates) until December, based on weak inflation. Consequently we think that euro/dollar will avoid parity."

But Wall Street stocks opened lower Friday as investors bet on a quicker rate hike.

The Dow Jones Industrial Average slumped 0.54 percent to 18,038.30 points in early trading

The broad-based S&P 500 fell 0.40 percent to 2,092.68, while the tech-rich Nasdaq Composite Index lost 0.20 percent to 4,972.76.

Tech giant Apple bolted 2.2 percent higher on news it will join the prestigious blue-chip Dow index, replacing AT&T. AT&T fell 1.2 percent.

- Iron ore prices weigh -

In European equities trading, Britain's mining sector was hit particularly hard by sliding iron ore prices.

Fresnillo sank 2.7 percent to 716.50 pence, Randgold Resources dropped 3.1 percent to 4,688 pence and Anglo American slid 2.1 percent to 1,140.50 pence.

"The FTSE 100 may have posted a new record close last night but (today's) trade is being overshadowed by another drop in iron ore prices," said Trustnet Direct analyst Tony Cross.

"Heavyweight mining stocks are languishing at the foot of the table as the price moved below $60 per tonne into territory where it is difficult to make any margin."

Asian markets diverged Friday despite encouraging gains in New York.

Tokyo stocks soared 1.17 percent thanks to a weaker yen and Seoul closed 0.73 percent higher.

But Hong Kong shed 0.12 percent and Shanghai slid 0.22 percent, with investors subdued a day after China lowered its economics growth target for 2015.