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But the weak U.S. jobs number was the market's focus on Friday. The employment report along with downbeat economic indicators in the manufacturing and service sectors earlier this week should ensure that the Federal Reserve's quantitative easing policy will be in place for some time, analysts said.
"It is likely the debate about QE tapering will be put on the back burner for now as employment gains look to be losing momentum,'' currency analysts at FOREX.com wrote on Friday.
Under quantitative easing, the central bank floods the market with cash through asset purchases, boosting the supply of the currency and therefore, weakening it. While that may theoretically weaken the dollar, some portfolio managers said this is not a reason to abandon the greenback just yet.
"This data interrupts the strong dollar trend against the euro for example, but medium-term, I am not convinced that this weakness in the dollar will continue," said Federico Garcia Zamora, director of currency strategies and senior portfolio manager at Standish Asset Management in Boston. Standish manages $167 billion in assets.
"We had expected some softness in the jobs data; after all, recent reports had been printing weaker-than-expected numbers. But this is a minor pullback in the U.S. economy and we're going to see a slowdown in the next couple of quarters and then we will see growth picking up again in the last quarter of the year," Zamora added.
U.S. Labor Department data showed that the economy added just 88,000 non-farm jobs last month, well below the consensus forecast for a gain of 200,000. The unemployment rate did inch lower to 7.6 percent from 7.7 percent the previous month, while January and February readings were revised upward to show that 61,000 more jobs were added.
(Read More: Forever Fed: Jobs Blues Sets Up Eternal Easing)
The euro rose as high as $1.3039, its strongest level since March 25. It was last trading at $1.3008, up 0.56 percent on the day. The single euro zone currency was up 1.5 percent so far this week - on track for its best weekly showing since mid-January.
"The 61,000 additional jobs (for January-February) were not sufficient offsets," said Marc Chandler, global head of foreign exchange strategy at Brown Brothers Harriman in New York. "Investors have also become more immune to the divergence with the unemployment rate. The unemployment rate ticked down ... as almost 500,000 people left the labor market."
Against the yen, the dollar last traded up 1.40 percent at 97.68 yen after earlier hitting session lows at 95.80 yen following the U.S. jobs report. It hit a new 3-1/2-year high at 97.77 yen.
Analysts said the main driver for the dollar's moves against the yen is still the BoJ's monetary stimulus. The greenback was on track to hit the psychological 100-yen threshold.
"Investors' mindset in trading dollar/yen is to buy it on dips," said Brian Dangerfield, currency strategist, at RBS Securities in Stamford, Connecticut.
"We know that dollar/yen will continue to strengthen given what's going on in Japan and the U.S. payrolls report gave the market the perfect opportunity to buy it back at a lower level," he added.
Overall, the greenback was up nearly 12.6 percent against the yen so far this year
The euro rose sharply against the yen, rising 1.95 percent at 127.03. It hit a peak of 127.25, the highest since early February.