Commodity currencies were among the best performers after upbeat US data showing a surge in private-sector hiring further helped boost risk appetite. This saw the New Zealand dollar hit a fresh 30-year high around $0.8344.
The common currency rose as high as $1.4374 after the ECB offered to provide liquidity to hard-pressed Portugal regardless of its ratings, which were cut to junk status by Moody's this week. It also signalled a further tightening was likely this year, after delivering a widely expected hike.
But analysts warned the path ahead for the euro remains rocky. Next week, euro zone finance ministers meet to discuss the broad outlines of a second bailout package for Greece.
"Euro sentiment is destined to remain highly fickle, with any rally in euro/dollar from here more likely to be a grind than a sprint with (bigger) downside risks ever present," BNP Paribas strategists wrote in a note.
The euro last traded at $1.4356, with resistance looming at $1.4395-$1.4400, the 50 percent retracement of the July 4-7 decline and 55-day moving average.
It also firmed against the safe-haven Swiss franc, rising to 1.2130 francs from below 1.2000.
With the euro supported, the US dollar lost ground against a basket of major currencies. The dollar index sagged to 74.917, from a high of 75.407.
But against the yen, the dollar reached a five-week high around 81.41 as US Treasury yields climbed in the wake of the private-sector jobs report.
Dollar/yen has been slowly drifting higher in the past few weeks, from the June 8 trough of 79.67.
Analysts expect the market to be subdued ahead of the US non-farm payrolls (NFP) data due at 1230 GMT. Forecasts centred on a rise of 90,000 jobs.
US data on Thursday showing a surge in private sector hiring in June strengthened views the economy was starting to escape the doldrums of the first half of the year and held out hope the NFP report could surprise on the upside.
"Higher-yielding currencies like the kiwi, the aussie, and the loonie surged against all their most traded counterparts as traders jettisoned so called 'safe haven' assets," said Michael Boutros, currency analyst at DailyFX.
The Aussie dollar, already supported by stronger-than-expected local jobs data on Thursday, extended gains to a high around $1.0780. It looked set to test resistance at $1.0790.
"Beyond whatever volatility the US payrolls report throws up, as well as euro peripheral developments, progress or otherwise on the US deficit/debt ceiling is now a key focus"," BNP Paribas analysts said.
"A deal that removes the ratings threat from the US sovereign would likely prove risk positive and dollar negative."
Copyright Reuters, 2011