The euro hit a more than four-week high against the dollar on Friday after a report that the European Central Bank had discussed the possibility of raising interest rates before the end of its quantitative easing program.
Sources told Reuters some ECB policymakers had suggested hiking rates from their current record lows before the end of QE stimulus, but that the discussion was brief, and the idea did not have broad support.
"I have no idea whether the reports are correct or not but it shows where we are," said Axel Merk, president and portfolio manager at Merk Hard Currency Fund in Palo Alto, California.
"It shows that the discussions (at the ECB) are leaning towards, 'How do we get out of QE?' ... There's been a fundamental shift, but it's a fundamental shift that's been gradually sinking in."
Merk noted multiple reports from euro zone countries supporting the premise that the economy is gaining traction. The ECB raised its growth and inflation targets for the euro zone in 2018 following its March meeting Wednesday.
The euro rose more than 1.1 percent against the dollar to a high of $1.0698, its strongest since Feb. 9. It was the euro's largest one-day gain since June 3, 2016. That helped the continental currency to its second consecutive weekly gain against the dollar.
The dollar index .DXY, which tracks the greenback against six major world currencies, fell to its lowest since Feb. 28.
The index fell 0.34 percent for the week, its first weekly loss in five weeks.
The dollar also was weighed down by the February U.S. non-farm payrolls report that showed wages rose less than expected. That tempered expectations for a spate of interest rate increases this year by the Federal Reserve.
"Once again the wage number continues to overshadow," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "And with wages rising in lackluster fashion, that has tempered expectations for the Fed to raise rates at a faster pace this year."
Fed fund futures prices showed investors see a 93 percent chance of an increase in U.S. overnight interest rates this month, according to CME Group's FedWatch tool. But that number was close to 90 percent before the data was released.
The greenback was slightly lower against the yen JPY= after touching a seven-week high of 115.50 yen. The dollar last traded at 114.78 yen. For the week, it fell 0.2 percent, its first weekly fall in four.
Reference: Dion Rabouin and Gertrude Chavez-Dreyfuss