NEW YORK: The dollar fell against major currencies on Thursday as investors booked profits on its recent gains, but the longer-term view on the greenback remained bullish.
Investors' paring short positions in the euro put pressure on the dollar, analysts said.
"I just think what we're in the midst of here is a classic short squeeze," said Richard Franulovich, senior currency strategist at Westpac Banking Corp. in New York.
"The euro has fallen dramatically in the last month and you've got some aggressive short positioning out here."
Latest data from the Commodity Futures Trading Commission showed short euro positions among speculators in futures markets were at their highest since June.
The dollar fell 0.18 percent against the euro to $1.0759 per euro and was down 0.21 percent against the Swiss franc at 1.0022 francs.
The dollar index also fell 0.15 percent to 98.874.
The euro dipped briefly below $1.07 on Thursday after European Central Bank chief Mario Draghi singled out the currency's more robust performance since May as one driver for a "weakening" outlook on inflation.
Those losses were short-lived as profit-taking set in, but there is a broad consensus among analysts that the dollar should rise long-term.
"Draghi spoke very dovishly this morning and all indications are that the Fed is going to hike policy two weeks after the ECB eases and these two big event risks are still two and four weeks away," said Franulovich. "So the reasons to be short euro are still very strong."
The release of more in-line data on the U.S. economy Thursday continued to support the case for a Federal Reserve interest rate hike next month, leading analysts to believe the session's early moves were likely just a function of traders cashing in on short positions on the euro.
"I think it's probably some position changes, maybe a little bit of market self-correction," said Juan Perez, foreign currency trader at Tempus Consulting, noting that conditions in Europe and the United States pointed to divergent rate policy.
"The likelihood of quantitative easing being added on in the euro zone on Dec. 3 and of the Federal Reserve hiking rates (later in December) are very, very high," he said.
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