Dollar regains ground vs euro after comments by ECB's Draghi

By Sam Forgione

NEW YORK (Reuters) - The U.S. dollar regained some ground against the euro on Friday after European Central Bank president Mario Draghi said the ECB could deploy more stimulus if needed, leading traders to reestablish short positions in the currency.

Draghi said the ECB is confident its latest measures will allow it to achieve its inflation target but stands ready to do more monetary stimulus if needed.

The comments came after the ECB announced a bare-minimum easing package on Thursday that disappointed expectations for a more dramatic move and led traders to scramble to unwind hefty short bets against the euro.

The euro hit a session low of $1.08360 after Draghi's comments, but did not stray far from Thursday's elevated levels. The euro posted its biggest one-day percentage gain against the dollar in nearly seven years on Thursday and hit a one-month high of $1.09810.

The euro remained on track for its biggest weekly percentage gain against the dollar in seven months.

"Are they doing their best to smooth the market and stem any panic? Yes, absolutely," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York, in reference to Draghi's comments. He said Draghi's remarks may have encouraged people to reestablish short bets against the euro.

Before Draghi's remarks, the euro was little changed against the dollar despite stronger-than-expected November U.S. jobs data that reinforced expectations that the U.S. Federal Reserve would hike interest rates for the first time in nearly a decade later this month.

"It's solidified now: the Fed will raise rates" at its December meeting, Anderson said. The Labor Department data showed U.S. nonfarm payrolls increased 211,000 last month.

The jobs data helped the dollar gain against the yen, since rate hikes are expected to boost the dollar by driving investment flows into the United States.

"The (U.S. jobs data) guarantees the Fed tightening, and the dollar/yen is up as a result of that," said Kathy Lien, managing director of FX strategy for BK Asset Management.

The euro was last down 0.67 percent against the dollar at $1.08680. The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.76 percent at 98.363.

The dollar was last up 0.49 percent against the yen at 123.200 yen. The dollar was last up 0.36 percent against the Swiss franc at 0.99690 franc.

(Reporting by Sam Forgione; Editing by James Dalgleish and Frances Kerry)