The US dollar was mostly lower Friday, retreating from strong gains earlier in the week while the euro bounced off recent lows.
The single European currency rose to US$1.1269 against US$1.1203 late on Thursday in New York, but still a far from an all-time high point of US$1.1933 reached in late May.
Against the yen, the dollar also sank to a global session low at ¥118.25 before finding support and heading up towards ¥118.38, also well off its session high of ¥119.21 and down from ¥118.71 late the previous day.
Traders said the environment appears to favor the dollar, but that the greenback is digesting some recent gains.
"The dollar retains upside potential during at least the remainder of 2003 as US business cycle conditions continue to outperform those of other G7 countries," said Robert Sinche at Citibank.
"Although the earnings season has checked the equity market rally for now, alleviating some of the pressure on fixed income markets, in general the macro backdrop continues to evolve in a dollar positive fashion," said Steve Pearson, economist at British bank HBOS.
Prospects of a US economic recovery appeared to brighten after a closely watched index from the Philadelphia Federal Reserve Bank showed Thursday a sharp improvement in activity in the US manufacturing sector in the Philadelphia region.
But Commerzbank strategist Nick Parsons said it was too soon to declare an end to the dollar's downturn.
"The question everyone is asking is whether this is the end of the 18-month bear market" for the dollar, he said.
"We believe it is too soon to call the turn, even though we have argued since the beginning of the year that the dollar would be stronger in both 2004 and 2005," he wrote in a note to clients.
The dollar was being quoted in late trade at 1.3618 Swiss francs from Sf1.3698 Thursday.
The pound sterling eased to US$1.5901 dollars, dropping from US$1.5960 Thursday.
It has been looking vulnerable since the Bank of England surprised markets by cutting interest rates to 3.50 percent from 3.75 percent two weeks ago.
This prompted speculation that further cuts were on the way.
``The dollar bulls have had a good run and are probably in the pub celebrating,'' said David Mozina, head of foreign exchange with Bank Of America in New York.
He said that despite its losses, the dollar was closing up against the euro for the fifth straight week.
A positive University of Michigan consumer sentiment survey, showing that consumer sentiment rose in July to 90.3 from 89.7 in June and 92.1 in May, failed to create enthusiasm, however, as the reading largely matched the 90.5 predicted by economists in a survey conducted by Dow Jones Newswires and CNBC.