The euro advanced Friday to within striking distance of its historical high just under US$1.1900, but thin market conditions could hinder further progress until full scale global trading resumes on Tuesday after the long weekend in both the US and the UK.
The single currency's gains spilled over into cross trading as well, as the euro hit a new all-time high at ¥138.12 and reached its highest point against the Swiss franc in two years, topping off at about 1.5250 francs.
As the euro surged across the board, the dollar retreated against most of its other major rivals. However, traders believed covert Japanese intervention capped the dollar's losses against the yen.
Late Friday, the euro was trading at US$1.1827, up from US$1.1699 late Thursday, with last-minute positioning in a thin market tending to exaggerate levels as activity wound down, traders said. The dollar was trading at ¥116.85, down from ¥117.22 late Thursday in New York.
Against the Swiss franc, the dollar was at 1.2885 francs, down from 1.2949 francs late Thursday. The British pound was at US$1.6362, up slightly from US$1.6352 a day earlier.
In an uncommon twist for pre-holiday trading, the euro shot up more than a cent from trading levels late Thursday.
The euro's break through "the top of its recent consolidation range" despite a lack of news and ahead of a three-day weekend in the US and UK, "is testament to the strength of the dollar downtrend and the degree to which underlying flows remained stacked against the dollar," according to UBS Warburg's currency advisory for Friday.
A big order to buy euros, which traders said came from a country in the Middle East, ignited the single currency's surge. With liquidity tight on a Friday preceding a long weekend, the euro gained momentum, tripping stop-loss orders along the way.
Perhaps most worrying for the dollar was the fact that strategists have concluded the euro climb was due mostly to long-term investors. What's more, they speculated that were the markets not so thin in advance of holiday weekend, the euro would likely be above the US$1.1840 level.
"There's going to be a lot of people caught on the wrong foot by this, I imagine, because the move was so quick," said Ian Gunner, head foreign exchange research with Mellon Bank in London. "As long as we hold this area without a dramatic pullback, the euro will likely push higher on Tuesday."
Meanwhile, the Canadian dollar ended little changed on Friday after continuing the weakening trend begun during Thursday's drastic selloff in overnight and early North American trading, but then rebounding as the session progressed.
Late Friday, the US dollar was trading at C$1.3744 down from C$1.3753 late Thursday.
Analysts said Thursday's weak Canadian April inflation report continued to undermine the Canadian dollar in earlier trading, as the data has reinforced expectations that Canadian interest rates will no longer be moving higher in months to come.