The euro sank to $1.20 Friday, its lowest level against the greenback since May 2010, as European Central Bank chief Mario Draghi reiterated the possibility of more stimulus coming.

Draghi said in an interview published in the German business daily Handelsblatt that deflation remains a threat and that the ECB needs to be prepared to counter it.

"If inflation is too low for too long, then it can happen that people will bet on a further fall in prices and postpone spending. We haven't reached that point yet. But we have to prepare for that risk," Draghi said.

But the risk that the central bank will not be able to move inflation higher "has increased compared to six months ago," Draghi said.

As a result, the ECB "is currently technically preparing to adjust the size, speed and composition of our measures at the start of 2015, should it become necessary," he said.

Both currencies meanwhile pulled up against the yen, which had strengthened on its safe-haven appeal ahead of the new year holiday.