The US dollar sputtered on Friday after briefly hitting a two-and-a-half-year high against the yen as markets shrugged off a widely anticipated report showing the US economy created 215,000 jobs last month.
After a choppy session, the euro eased to US$1.1716 at 10pm GMT, from US$1.1734 late on Thursday in New York.
The dollar briefly moved above ¥121 for the first time since 2003, but at the end of the day was quoted at ¥120.56 from ¥120.62 on Thursday.
Analysts said the US payrolls report was in line with expectations and optimism was tempered by a downward revision to the jobs figure for October, which was reduced to 44,000 jobs from the initially forecast 56,000.
Boris Schlossberg, strategist at Forex Capital Markets, said traders were sensitive to economic data that could affect interest rates, making the market volatile.
"At present, the single greatest support to the dollar versus the yen is continued flow of capital into the US seeking higher yields," he said.
"Should that dynamic change for any reason -- perhaps a slower than anticipated Christmas season or a brutally cold US winter that casts a freeze on consumer spending, the market can do a sudden about face and begin a massive round of carry trade liquidation."
But the analyst said the euro "appears to have found a temporary bottom" following a hike in rates by the European Central Bank which "at least made a token effort at compressing interest rate differentials. Going forward the dollar will have to produce better and better results to generate additional buying momentum."
Over the past year, the euro has shed around 10 percent of its value against the US dollar, following a three-year upturn, owing to a growing focus on interest rate developments, particularly between the eurozone and the US.
The US Federal Reserve raised its benchmark rate a quarter-point for the 12th consecutive time last month to four percent, with the market confident that at least two more hikes are in the pipeline.
In the eurozone, rates are currently 2.25 percent after a hike of 25 basis points by the European Central Bank on Thursday.
The European Central Bank said on Thursday it had decided to raise rates, but ECB president Jean-Claude Trichet sought to cool speculation that the rate hike was part of a series of tightening actions.
Markets were also expected to keep a close eye on proceedings at a two-day Group of Seven meeting in London where finance ministers and central bankers were to convene on Friday evening.
The special event, which has been organized to bid farewell to outgoing US Federal Reserve chairman Alan Greenspan, is also to serve as a forum for more discussions on stalled global trade talks ahead of a meeting of the WTO in Hong Kong later this month.
The yen was hurt as rumors circulated that the China was preparing to revalue the yuan.
A report by German business weekly WirtschaftsWoche, citing government sources, said that China was planning to revalue the yuan against the dollar by 7.2 percent with effect from Jan. 1 next year.
In late New York trade, the US dollar stood at 1.3165 Swiss francs from SF1.3173 on Thursday.
The pound was being traded at US$1.7328 after US$1.7311 late on Thursday.
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