The euro held most of its gains today as the European Central Bank's increased economic stimulus fell well short of market expectations.

Up to yesterday, speculation had swirled for weeks that the ECB would further loosen its grip on monetary policy and ramp up a vast bond-buying programme - effectively pumping cash into the economy - to breathe new life into the euro zone. 

Those expectations sharply pushed down the euro, and revived talk that it may soon hit parity with the dollar for the first time since 2002. 

The ECB yesterday cut deposit rates further into negative territory - meaning lenders must pay to park cash with it and so look to loan more - and extended the length of its bond purchases. 

However, the announcement left traders disappointed as it crucially failed to increase the size of the stimulus while the rate cut was less than hoped for. 

The news sent the euro soaring 3.1% against the dollar yesterday.

The euro was trading at $1.08 today compared to $1.09 in New York last night, well above the $1.06 level before the ECB decision. 

Meanwhile, US Federal Reserve boss Janet Yellen said yesterday that the Fed remained wary of a interest rate rise because of concerns about a strong dollar and the divergence between its monetary policy and those of other central banks. 

While the Fed is still widely expected to lift rates later this month, Yellen's comments caused dealers to ease off a recent run-up in the US unit. Traders are now awaiting the release of key US jobs data later today.

The euro was also worth 71 pence sterling today.