Schengen visa- I transferred funds from my savings account to current account for the visa. Should I explain in the cover letter?

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It can't possibly hurt to mention, and might help avoid confusion, so it sounds like a good idea.

However, formatting this note as a "cover letter" (with all the various trapping of letter layout, salutations at the top and signatures at the bottom, etc. etc.) would seem to be overkill. The consulate are not out to judge your eloquence or even your polite boilerplate -- just to spend as little time as the have to to get an overview of your economic situation.

You should be supplying a numbered list of the documents you enclose with the application in any case. If there's just that single transaction you think deserves explanation, you can pit it as a note right in the document list.

If there are several transactions you have comments on, you can attach a separately sheet with your notes to the bank statements, as an enclosure with its own number. Make it skimmable, in list format -- short and to the point, rather than long paragraphs of prose.

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