The euro extended gains against the dollar to hit a session high on Thursday after European Central Bank president Jean-Claude Trichet said the euro zone economy will recover at a gradual pace.

The euro hit as high as $1.4917 EUR=, according to Reuters data. It last traded at $1.4905, up 0.2 percent.

Trichet said the latest evidence suggests a pick-up in activity in the second half of this year and that extra liquidity measures can be phased out in a timely manner. 

The comments sound slightly more optimistic on the growth outlook and confirm our view that the central bank is inching gradually closer to starting its exit strategy from the currently very expansionary policy, currency strategists at Action Economics said.