Investing.com - The euro pared back gains after rising above the $1.25 level on Thursday to fresh three-year highs boosted by remarks from European Central Bank President Mario Draghi.
EUR/USD was trading at 1.2506 by 09:55 AM ET (14:55 GMT), up 0.79% after climbing as high 1.2536 earlier, a level not seen since December 2014.
The euro backed away from the highs of the day after Draghi said he does not expect the ECB to raise interest rates in 2018.
"Based on today’s data I can see very few chances that interest rates could be raised at all this year," he said.
The euro had been boosted after Draghi said the euro zone economy has accelerated more than expected and that inflation is expected to rise in the medium term and head back towards the bank’s 2% target.
He noted that underlying inflation remained subdued.
Regarding the recent strength of the euro Draghi said recent exchange rate volatility is a source of uncertainty and needs to be monitored for its impact on short term price stability, but reiterated that the ECB does not target exchange rates.
The ECB left interest rates unchanged and repeated that its bond buying program will run until September or beyond if necessary earlier Thursday.
The euro remained higher against the pound, with EUR/GBP advancing 0.25% to 0.8734.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, down 0.6% at a three-year trough of 88.49, pressured lower by the stronger euro.
The dollar was also on the defensive after U.S. Treasury secretary Steven Mnuchin told the World Economic Forum in Davos on Wednesday that a “weaker dollar is good for trade.”
The remarks were seen by markets as a departure from traditional U.S. currency policy.
His comments, along with Tuesday decision by President Donald Trump to impose import tariffs on washing machines and solar panels reignited concerns over his administration’s protectionist stance and its possible impact on global trade.