The dollar finished mixed Friday after initially rising as a report on U.S. jobs suggested the labor market is recovering, but then reversing course after comments from a central bank official tempered expectations for an interest-rate increase.
In late trading in New York, the euro rose to $1.4236 from $1.4201 late Thursday. The euro fell as low as $1.4060 earlier in the day. The British pound rose to $1.6121 from $1.6065, erasing an earlier decline.
But the dollar held on to finish higher against the Japanese yen. It rose as high as 84.73 Japanese yen, the highest point since September 2010, before giving up some of the gains and settle at 84.09 yen. That was still up from 83.07 yen late Thursday.
The Labor Department said the U.S. unemployment rate fell to a two-year low of 8.8 percent in March as 216,000 new jobs were added, more than the 185,000 economists had expected. The good news on jobs helped support expectations that the Federal Reserve might focus more on the threat of inflation, leading the central bank to raise interest rates sooner than had been thought. Higher rates tend to increase demand for the currency linked to that country or region.
But the dollar came off its highs of the day after William Dudley, the president of the Federal Reserve Bank of New York, said in a speech in Puerto Rico that the recent improvement in the economy was not a reason for the Fed to "reverse course" from its efforts to support the economy and that a "substantial pick-up" in job growth was "sorely needed."
The comments from Dudley, a voting member of the Fed's committee that sets interest rates, suggested high unemployment remained a focus of the Fed. Meanwhile, inflation resulting from rising food and energy prices was more likely to be "transitory," Dudley said, echoing previous comments made by Fed Chairman Ben Bernanke.
"If you take away the negatives of soft employment, it does leave this potential focus on higher inflation" by the Fed, said Bob Sinche, the head of currency strategy at the Royal Bank of Scotland in Stamford, Conn.
If strong job reports continued, the Federal Reserve could increase interest rates as early as the first quarter of 2012, said Ethan Harris, an economist at BofA Merrill Lynch.
The Fed has kept interest rates at a record low _ near zero _ since December 2008 to support lending and economic growth, and some economists had said they expected super-low rates to continue through the end of next year because of high unemployment and the troubled housing market.
Expectations that the Fed will try to keep interest rates low for a long time have weighed on the dollar this year, especially because the European Central Bank has hinted that it will raise rates as early as this month.
The jobs report helps build expectations that the Fed's "easing cycle" _ when it tries to drive interest rates lower by keeping rates at zero and buying up massive amounts of government bonds _ is ending, said currency strategist Lena Komileva of Brown Brothers Harriman in London, which will support the dollar's value.
Separately, a private-sector report on manufacturing boosted expectations for the U.S. economy. The Institute for Supply Management said the industrial sector grew for the 20th straight month, at a pace only slightly slower than in February, which had been the highest reading in nearly seven years. Manufacturing has been a key driver of economic growth and employment since the recession ended in June 2009.
In other trading Friday, the dollar fell to 96.47 Canadian cents from 96.88 Canadian cents but gained to 0.9237 Swiss franc from 0.9163 Swiss franc.