The euro was under pressure and safe-haven assets in demand on Friday on signs that fallout from the euro zone's debt crisis is hitting its banks, but hopes U.S. jobs data later in the day would brighten the economic outlook lifted stocks.
The euro was down slightly on the day versus the dollar at $1.2776, having dropped as low as $1.2763, its weakest since September 2010 It was also a 16-month lows against the British pound and near an 11-year low versus the yen.
There is a general tendency to sell the euro on any rallies, said Ankita Dudani, currency strategist at RBS.
Even if we get a strong non-farm payrolls print it would be supportive for risk sentiment but not so for euro/dollar, he said.
Fears over the outlook for the single currency region's banks have grown since Italy's UniCredit
UniCredit stock has fallen around 30 percent in the previous two sessions and opened on Friday down about 5 percent, while the STOXX Europe 600 banking index <.SX7P> has dropped about 5 percent in the same period.
The FTSEurofirst 300 <.FTEU3> index of top European shares rose nearly 0.5 percent in low volumes ahead of the U.S. jobs data. Banking stock rose 0.15 percent.
Non-farm payrolls data due later on Friday is expected to show 150,000 jobs were added in December. If the figures come in as expected, near-term market sentiment could tip to positive.
Those hopes were given a boost on Thursday when weekly data showed U.S. private-sector hiring surged in December and claims for unemployment benefits fell.
Euro-denominated assets are also being undermined by deep-rooted concerns about a possible default by the region's strugglers, notably Greece, expectations for credit downgrades of top-rated euro zone economies including France and worries over whether highly-indebted countries such as Italy and Spain can successfully refinance maturing debts.
Little relief was in sight with next week's Italian and Spanish government bond sales likely to keep the market on edge and the euro under pressure, market players said. Yields on both countries' bonds rose on Friday.
Europe's still the main determinant, said Simon Burge, portfolio manager at ATI Asset Management in Sydney. It comes down to seeing some bottoming in these global growth expectations, which I don't know if we've seen yet.
As the vulnerable euro and the European shares whetted appetite for safe-haven assets, gold was on course for its best week in a month at around $1,620 an ounce.
(Additional reporting by Jessica Mortimer and Atul Prakash)