The dollar climbed to two-month peaks against the yen and a basket of currencies on Friday after a government report showed the U.S. economy shed just 20,000 jobs in April, fewer than economists had expected.
The report further reduced the chances that the Federal Reserve would cut interest rates at its upcoming meetings, which burnishes the appeal of the dollar.
It also backed a growing view that the U.S. economic slowdown may not be as deep as some originally thought.
"The market likes the U.S. jobs report and most are thinking that if we do slip into a recession, it's going to be mild and brief," said Matt Kassel, director of foreign exchange at ING Capital Markets in New York. "And if we are in a recession, it is going to be a soft landing. So the market is continuing to do what it has been doing and that is to buy dollars," he added.
The Labor Department said the U.S. economy shed just 20,000 jobs last month, from an upwardly revised 80,000 in March.
Markets were expecting job losses of 80,000, according to a Reuters poll.
The national unemployment rate slipped to 5.0 percent from 5.1 percent in March, compared with forecasts of a rise to 5.2 percent.
"This release should continue to give the Fed more cause for pause, even though the FOMC is not inclined to give too much weight to one payroll number," said Meny Grauman, an economist at CIBC World Markets in Toronto.
The euro fell to $1.5360, the lowest since March 24, according to Reuters data. It traded back up at $1.5425 by midday, down 0.3 percent on the day.
For the week, the euro has weakened 1.3 percent against the dollar, declining for a second straight week.
Against the yen , the dollar rose to 105.69, a two-month high, and has gained nearly 1 percent against the yen on the week. It last traded at 105.29, up 0.8 percent on the day.
The New York Board of Trade's U.S. dollar index rose to two-month peaks at 73.698 and last traded at 73.422. It advanced 0.9 percent for the week, it's third straight weekly gain.
The dollar also rose to a nine-week high versus the Swiss franc to 1.0606, before edging back down to 1.0563 francs. The greenback was up 2.08 percent for the week against the franc and on pace for its largest weekly gain since last December.
The dollar was also mildly supported by a higher-than-expected rise in U.S. factory orders for March and news about the injection of additional liquidity by major central banks to stabilize credit markets.
The Fed said it would step up the amounts offered in some cash auctions to financial institutions, while the European Central Bank and Swiss National Bank will boost their auctions of dollar funds by European banks.
The central bank's actions strengthened investor optimism that monetary authorities are successfully addressing the global credit crisis.
But some analysts remained doubtful about the dollar's recovery and the strides made by the U.S. economy, saying the bottom line is that it is still in the midst of a slowdown.
"We expect that a larger employment decline will resume in coming months. As a result, we are still not inclined to call for the start of a major dollar uptrend," said Nick Bennenbroek, head of FX strategy at Wells Fargo in New York.