The euro slid to near $1.36, a three-month low, blowing past its 200-day moving average. It shed about 0.1 percent to a 17-month low near 80 British pence as rate differentials between euro zone and UK government bond yields continued to diverge in the pound's favor.
Traders said investors were also cutting positions ahead of EU parliament election results due on Sunday. A strong showing by fringe parties would highlight the anti-euro and anti-austerity sentiment in some countries like Italy and Greece that have recently regained market confidence.
Most EU countries vote on Sunday, when any trend towards the political extremes may become clearer. Results, including the allotment of seats in the parliament, will be announced at around 2100 GMT on Sunday.
Reflecting the uncertainty, implied volatilities in the euro/dollar pair picked up. The one-month implied volatility - a gauge of how sharp expected moves in the currency is likely to be in the coming month - rose to its highest since early April, trading at around 6.05 percent.
The euro's losses saw the dollar index, which tracks the greenback against a basket of major currencies, rise to its highest in six weeks around 80.43.
The dollar touched a one-week high against the yen, holding gains made after promising U.S. housing and factory activity data on Thursday nudged U.S. Treasury yields away from recent lows.
Against the yen, the dollar was up about 0.2 percent around 101, well off a 3-1/2 month trough of plumbed on Wednesday.
The benchmark U.S. Treasury yield briefly hit a 1-1/2 week high of 2.57 percent after the economic data. In European trade, the 10-year yield stood at 2.55 percent, mostly unchanged from the U.S. close, but above recent lows of 2.47 percent struck on May 15.
Traders said liquidity would be thinning out going into a long weekend in London and in the United States.
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