Simon Cooke resigned as deputy leader of the council after last Tuesday's outburst. But, with the support of local and national Tories, he has held onto his corporate and regeneration portfolio, which includes the community cohesion brief.
Community cohesion is particularly sensitivity in Bradford, scene of race riots in 2001.
Lynne Joyce (Lab), the target of Mr Cooke's gesture, which followed a speech she had given on community safety, said: 'I can only think he did it because I was born in Germany.
Mr Cooke's gesture comes less than two months before the Conservative-minority administration goes to the polls against a Labour group with more seats.
But with Labour calling for his resignation from the executive, Mr Cooke has received the backing of leader Margaret Eaton and Tory local government spokesman Eric Pickles, a former leader of Bradford.
Mr Pickles admitted Mr Cooke's behaviour had come at a sensitive time, ahead of the 10 June election.
He said: 'There are things you shouldn't do. But I think he should be given another chance - we all make mistakes.'