NEW YORK (Reuters) - The euro hit a three-week low against the dollar and bonds edged higher on Thursday as Spain's debt burden fueled worries of further problems for euro zone economies and curbed appetite for riskier assets.
Global stocks dipped, while energy and gold prices climbed.
A poor Spanish bond auction on Wednesday added to worries the impact of the European Central Bank's one trillion euro injection of cheap three-year funds into the banking system may be coming to an abrupt halt.
Spanish 10-year government bond yields rose as high as 5.86 percent on Thursday, dragging Italian rates in their wake as investors fled to the relative safety of German and U.S. debt.
The moves follow two days of losses in stocks and other markets after minutes from the last Federal Reserve meeting released Tuesday dented hopes of further economic stimulus.
"The euro zone firewall set up is not big enough to save Spain," said Dan Dorrow, director of research at Faros Trading in Stamford, Connecticut."If the ECB were the Fed right now they would be embarking on quantitative easing or lowering rates, but the ECB is more passive in its approach, which is dangerous, and I think they are walking a tightrope."
The worries added a safety bid for bonds, with the benchmark 10-year U.S. Treasury note up 12/32, the yield at 2.1805 percent.
The euro was last down 0.6 percent at $1.3064 against the dollar, having hit a three-week low of $1.3033. It also hit its lowest in four weeks against the yen at 106.86 yen before recovering to trade at 107.58 yen, still down 0.7 percent.
Spain's cost of borrowing on markets over 10 years jumped 30 basis points on Wednesday after borrowing costs rose at its bond auction. The yield premium over German benchmarks is now 411 basis points, its highest since late November before the ECB flooded the market with three-year funds.
The MSCI world equity index .MIWD00000PUS was last down 0.1 percent. U.S. stocks ended nearly flat but the S&P 500 registered its worst week this year.
The Dow Jones industrial average .DJI was down 14.61 points, or 0.11 percent, at 13,060.14. The Standard & Poor's 500 Index .SPX was down 0.88 points, or 0.06 percent, at 1,398.08. The Nasdaq Composite Index .IXIC was up 12.41 points, or 0.40 percent, at 3,080.50.
Offsetting the concerns over Spain for U.S. stocks was data showing the number of Americans lining up for new jobless benefits fell to the lowest in nearly four years last week.
Analysts said the claims data and a report on private-sector jobs earlier this week may bode well for the U.S. government's widely watched monthly employment report, which is due Friday. The U.S. stock market will be closed for an extended Easter weekend.
The U.S. outlook was in sharp contrast with Europe where separate reports showed German industrial output fell more than expected in February and British factory output suffered its biggest monthly fall in almost a year.
Europe's FTSEurofirst 300 index .FTEU3 ended up 0.1 percent, but banking stocks, many of which have large exposure to the region's lower-rated sovereign debt, edged lower.
Spanish economic overview link.reuters.com/quf25s
Fed, ECB stimulus vs global stocks: r.reuters.com/rec57s
Spot gold was up 0.6 percent at $1,628.31 an ounce.
Investors covered short positions after a sharp two-day pullback, and a crude oil rally also buoyed the precious metal that sank early this week on disappointment further U.S. monetary easing looked less likely.
Market watchers said some hedge funds might have reduced gold holdings due to stronger U.S. economic data and easing of fears about European debt.
"A lot of the gold trade by hedge funds was specifically tied to a new round of Fed stimulus," said Jeffrey Sica, chief investment officer of SICA Wealth Management with more than $1 billion in assets.
In the oil market, Brent May crude rose $1.09, or 0.89 percent, to settle at $123.43 a barrel, while U.S. May crude rose $1.84, or 1.81 percent, to settle at $103.31.
Reporting by Caroline Valetkevitch, additional reporting by Emelia Sithole-Matarise in London and Julie Haviv and Frank Tang in New York; Editing by Bernadette Baum, Chizu Nomiyama and Andrew Hay