The single European currency approached a four-month low when it hit 1.2967 but recovered to stand at 1.2989 later in Tokyo afternoon trade, against 1.3006 dollars in New York late Thursday.

The euro fetched 108.44 yen versus 108.30 yen the previous day. The dollar firmed to 83.48 yen from 83.34 yen.

European sovereign debt woes and increasing confidence in the US economy both played their part in the euro's fall against the dollar, dealers said.

Hopes are high that fresh US labour figures on Friday will show a rejuvenated jobs market, after a string of recent positive data reinforced hopes that the economy has indeed turned a corner.

The US Labor Department Thursday said new unemployment benefit claims rose last week to 409,000 -- but despite the increase, they remained near levels last seen in 2008, before the depths of the economic crisis.

The dollar gained ground overnight on the back of the brighter outlook, but Tokyo market participants held off any major bets before the release of the crucial employment report, dealers said.

"There likely won't be any strong trend in Tokyo trade ahead of the jobs data and the dollar's topside should be heavy," Hiroshi Maeba, a senior foreign exchange dealer at Nomura Securities, told Dow Jones Newswires.

The greenback climbed against other Asian currencies.

It rose to 1.2964 Singapore dollars from 1.2927 Thursday, to 44.10 Philippine pesos from 43.90 and to 30.27 Thai baht from 30.21.

The dollar also gained to 9,004.25 Indonesian rupiah from 8,990.00 and to 29.32 Taiwan dollars from 29.22.