The euro declined on Thursday on the European Central Bank's cautious economic outlook, while oil prices recovered on a drop in US crude inventories, erasing losses on OPEC's failure to reach a deal to set an output ceiling.
The crude market rebound lifted Wall Street and European stocks out of the red, removing the earlier sting from a 2 per cent slump in Japanese shares. The Standard & Poor's 500 index closed at its highest level in seven months.
US and German government bond prices firmed on safe-haven bids as a possible US interest rate increase and the June 23 referendum on whether Britain would leave the European Union, or "Brexit,” posed near-term risks that could rattle investors.
“The bigger looming issue is the Brexit question. If it comes to pass, it would help calm markets,” said Matt Kaufler, portfolio manager at Federated Investors in Rochester, New York.
The ECB nudged up its inflation forecast for 2016 but predicted that the price growth would remain below target through 2018 as depressed energy costs have held down prices of other goods and services.
OPEC's failure
The group of the world's major oil exporters failed to agree to an output policy, with Iran insisting on the right to ramp up production.
Disappointed by OPEC's inability to clinch a deal addressing the global supply glut and sluggish demand, traders initially sold oil futures. Buying later emerged in reaction to government data showing a drop in US oil inventories.
Crude futures
US crude futures settled up 16 cents or 0.33 per cent at $49.17 a barrel, while Brent oil futures settled up 32 cents or 0.64 per cent at $50.04.
The disinflationary effect of cheap oil on the euro zone, together with weak regional growth, will likely lead the ECB to stick to its negative interest rate policy for a protracted period. This ultra-loose policy stance would undercut the euro.
Weak euro
The euro was down 0.32 per cent at $1.1148, fading from its highest against the greenback in over a week. It lost nearly 1 per cent at 121.39 yen after hitting its weakest against the yen since April 2013.
The euro's decline offset dollar weakness against the yen and other major currencies. The dollar index firmed 0.1 per cent at 95.560.
The rebound in oil prices boosted US energy stocks, helping reverse initial losses of major market indexes.
US stocks
The Dow Jones industrial average ended up 48.89 points, or 0.27 per cent, at 17,838.56, the S&P 500 closed 5.93 points, or 0.28 per cent, higher at 2,105.26 and the Nasdaq Composite finished up 19.11 points, or 0.39 per cent, at 4,971.36.
Europe's broad FTSEurofirst 300 index eked out a 0.05 per cent gain at 1,350.99.
Earlier, Tokyo's Nikkei tumbled 2.3 per cent.
The MSCI world equity index, which tracks shares in 45 nations, edged up 0.08 per cent to 402.49.
Treasury yield
In the bond market, the benchmark 10-year Treasury note was up 12/32 in price to yield 1.802 per cent, after touching its lowest yield in two weeks.
German 10-year Bund yield fell nearly 2 basis points at 0.118 per cent.
Spot gold prices fell $1.34 or 0.11 per cent, to $1,211.06 an ounce.