(Updates with open of U.S. markets)
* Euro rises to near 2-yr high as Draghi comments digested
* Europe stock index drops, Germany's DAX down nearly 2 pct
* Wall St pulls back from records, GE drops on sour report
* Oil falls over 1 pct, gold shines with weak dollar
By Lewis Krauskopf
NEW YORK, July 21 (Reuters) - The U.S. dollar sank to its lowest in more than a year against key world currencies on Friday as investors assessed comments from the European Central Bank and obstacles to U.S. President Donald Trump's domestic agenda, while world stock markets were poised to snap a 10-session streak of gains.
Gains in the yen, gold and U.S. Treasuries pointed to moves into safe-haven assets compared with stocks that are considered riskier. Oil prices sank more than 1 percent.
The euro built on sharp gains from a day earlier, rising to near two-year highs against the dollar and undermining European stocks, with Germany's DAX GDAXI equity index down 1.7 percent.
ECB President Mario Draghi said on Thursday financing conditions remained broadly supportive, and that the euro's appreciation had "received some attention." However, he did not cite that as a problem nor did he directly try to talk the currency down. fact that Draghi didn't necessarily argue too much against the strength of the euro...certainly gave the greenlight for individuals to want to own the currency again or actually add to their positions," said Dean Popplewell, chief currency strategist at Oanda in Toronto.
MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.32 percent, falling after 10 days of gains.
U.S. stock indexes opened lower, pulling back from record high levels reached earlier in the week.
The Dow Jones Industrial Average .DJI fell 67.58 points, or 0.31 percent, to 21,544.2, the S&P 500 .SPX lost 5.36 points, or 0.22 percent, to 2,468.09 and the Nasdaq Composite .IXIC dropped 14.87 points, or 0.23 percent, to 6,375.13.
General Electric (NYSE:GE) GE.N shares dropped 3.2 percent after the industrial conglomerate's profit report. market is pausing after another stellar run to record high levels, as people take modest profits off the table and cut back on risk just a little bit going into the weekend," said Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin, Texas.
Next week, investors will be focusing on a meeting of Federal Reserve policymakers, the release of second-quarter economic growth data, as well as a flood of corporate results.
HEADWINDS
In Europe, the pan-European FTSEurofirst 300 index .FTEU3 lost 1.08 percent.
"The strength of the euro does appear to be acting as a bit of a headwind for European stocks," said CMC Markets analyst Michael Hewson.
In currencies, the dollar index .DXY fell 0.25 percent, falling to its lowest point since June 2016. euro EUR= was up 0.18 percent to $1.165. The Japanese yen strengthened 0.63 percent versus the greenback at 111.22 per dollar.
Aside from the ECB comments, investors were also assessing whether Trump's recent legislative setbacks and developments involving a probe into Russian meddling in the 2016 U.S. general election were threatening his domestic plans for tax cuts and infrastructure spending.
"Compounding the (weaker dollar) move is this latest news on the political front in the U.S. about the Russia investigation expanding to Trump's business affairs," said Alvise Marino, FX strategist at Credit Suisse (SIX:CSGN) in New York. "This is on top of the fact that Senate has not been able to pass anything meaningful on the healthcare front."
U.S. Treasury yields fell in step with European yields as the euro strengthened against the dollar, raising doubts whether the ECB would scale back its bond purchases later in 2017. 10-year notes US10YT=RR last rose 8/32 in price to yield 2.2393 percent, from 2.266 percent late on Thursday.
Oil prices fell after a consultancy report forecast a rise in OPEC production for July despite the group's pledge to curb output, reigniting concerns the market will stay awash with crude. crude CLc1 fell 1.45 percent to $46.24 per barrel and Brent LCOc1 was last at $48.67, down 1.28 percent on the day.
Spot gold XAU= added 0.5 percent to $1,250.53 an ounce, as the weaker dollar made bullion cheaper for holders of other currencies. World FX rates in 2017
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