The U.S. dollar hit a roughly one-month low against the euro on Thursday after the European Central Bank cut its interest rate on deposits by just 10 basis points, stinging some euro short-sellers who were expecting a sharper move.
The euro surged against the dollar to $1.0982, its highest level since November, after the decision and ECB President Mario Draghi's comments at a press conference. The euro was last up 3.27 percent against the dollar at $1.0954.
Draghi said the central bank could make other moves later if needed and described the decision to reinvest principal repayments on bonds it has already bought to maintain liquidity as "very significant."
The ECB's decision catalyzed a euro short squeeze, or a rapid repurchase of the currency by traders who had shorted it on expectations of a more dramatic move, analysts said.