The euro fell more than 1 percent on Thursday, surrendering most of the gains it made against the dollar following China's devaluation of the yuan last month, after European central bankers cut economic growth targets and left interest rates unchanged.
The dollar rallied, helped by weekly jobless data signaling a strong U.S. labor market the day before Friday's August jobs report, which may be crucial for Federal Reserve policymakers considering raising interest rates.
The European Central Bank lowered its forecasts for inflation and economic growth, citing a slowdown in emerging markets and weak oil prices. ECB President Mario Draghi warned conditions could worsen.
The revisions raise doubts about the effectiveness of the ECB's $1 trillion-euro asset-buying program, which is aimed at stimulating growth and boosting consumer prices after years of low inflation.
Draghi said inflation risks remained to the downside, mainly because of low crude oil prices, and that the bond-buying program would run at least another year.