Profit-taking interest for the euro stayed intact at $1.3980 and above, while a growing view that the ECB will raise its key interest rate as early as in April has given a firm floor to the single currency.
At a news conference on Thursday after the ECB left its key interest rates unchanged, ECB President Jean-Claude Trichet vowed "strong vigilance" on inflation and said a rate hike next month is "not certain but possible." But he added that such a move wouldn't be "the start of a series of rate-hike increases."
"It has became clear that the ECB will shift away from its easy monetary policy faster than its U.S. counterpart," said Yoshio Yoshida, a trader at Mizuho Trust and Banking in Tokyo. "But I am not sure about how fast the ECB will tighten its credit in a row".
"It would take time for the U.S. Federal Reserve to end its present quantitative credit easing as it needs to examine a series of economic indicators until June," he added.
Daisuke Uno, chief strategist at Sumitomo Mitsui Bank said "the market was caught off guard," about the possibility of a rate increase in April, which has lifted the pair's resistance to 1.4300 from around 1.3800 before Trichet's comments. Uno said that whether the ECB will keep tightening credit could largely depend on the sustainability of the global economy and oil price movements.
At 0450 GMT, the euro was $1.3955 against $1.3967 late Thursday in New York, according to EBS via CQG. The dollar was at Y82.34 from Y82.44, while the euro was Y114.91 from Y115.07.
The dollar was trapped in a tight range against the yen, with the upside capped at Y82.50 due to selling interest from Japanese exporters ahead of their fiscal book-closing at the end of March, while the downside was solid at Y82.00, traders said.
Trade will likely be thin ahead of U.S. jobs data due out at 1330 GMT. Non-farm payrolls are expected to increase 200,000 in February from a month earlier after a gain of 36,000 in January, according to the median forecast of economist surveyed by Dow Jones Newswires. The unemployment rate is seen at 9.1%, compared with 9.0% in the previous month.
Uno said the downside risk for the dollar against the yen lurks after the release of the U.S. jobs data, since the market has been overly optimistic about the direction of the U.S. economy.
The ICE Dollar Index, which tracks the U.S. dollar against a trade-weighted basket of currencies, was at 76.671 from 76.463.
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