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The ECB eases and the euro… rises?

The euro is resisting the European Central Bank's (ECB) all-out assault on the specter of deflation, surprising the market with its continued rise, and some analysts believe it won't weaken anytime soon.

"A lot of people are scratching their heads" over the euro's climb, said Emma Lawson, senior currency strategist at National Australia Bank.

"There's a lot of skepticism that these measures won't be effective or are not enough," she said. "It's not a supply of funding [damping the euro zone economy]. Demand in Europe is very weak."

Read More Draghi breaks new ground with negative interest rate

The euro initially dropped as low as $1.3505, its lowest since February, after the ECB took the unprecedented step Thursday of imposing a negative interest rate on banks for their deposits in addition to cutting its main interest rate from 0.25 percent to 0.15 percent. But it quickly recovered and rose above pre-announcement levels, fetching $1.3661 in early Asian trade Friday.

"The last thing the ECB needs right now is a stronger euro because that may well push the Eurozone over the edge in terms of that deflationary trap," said Jonathan Pain, writer of the Pain Report, noting the region's inflation rate fell to 0.5 percent last month, well below the ECB target of around 2 percent.

Ma-Ke | iStock/360 | Getty Images

While the ECB's measures exceeded many analysts' expectations, many have doubts they would manage to push up inflation.

"This is like bringing a butter knife to a machine gun fight in this fight against deflation," Michael Gayed, chief investment strategist at Pension Partners, told CNBC.

The negative deposit rates "could have a deflationary effect as opposed to an inflationary effect," as it could encourage banks to pass on the extra cost to its customers, he said.

Others believe the announcement spurred a "buy on rumor, sell on fact" type of short-covering rally.

Read More ECB firing 'lots of small bullets': El-Erian

Credit Agricole, for one, doesn't expect that rally will reverse in the weeks ahead.

"Efforts to improve liquidity conditions are likely to keep euro-denominated risk assets attractive," it said in a note Thursday.

The markets certainly agreed: shares around the Eurozone touched multi-year highs, while already low regional bond yields fell. Germany's 10-year bond yield fell to 1.417 percent Thursday from 1.438 percent Wednesday, while Spain's was at 2.827 percent, down from 2.879 Wednesday. Bond yields move inversely to prices.

Read More ECB proves the war on deflation is raging

Another factor pushing up the euro was the implication from ECB President Mario Draghi that rates aren't likely to go lower anytime soon, meaning the market isn't likely to expect any policy changes ahead, Credit Agricole said.

"Stable rate expectations, a still positive euro-related capital flow situation as well as speculative short positioning at multi-month highs are likely enough to keep position-squaring-related euro upside risk intact for the weeks to come," it said. Its one-month forecast is for the euro to fetch around $1.39.

Some analysts are looking ahead to potential positive effects from the ECB's measures as helping to support a longer-term rally.

Read MoreTime to invest in Europe: Pros

"Measures to support growth and reduce tail risks across the euro area are positive for the euro," Brian Martin, senior European strategist at ANZ, said in a note Thursday.

To be sure, some expect the euro will still weaken ahead.

On a longer term, Credit Agricole maintains a bearish euro view, largely due to projections for the U.S. growth outlook to improve ahead, which will lead to expectations for the U.S. Federal Reserve to turn more hawkish. It expects the euro to fetch around $1.30-$1.33 by year-end.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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