The greenback fell broadly against major currencies on speculation the Federal Reserve will continue to cut interest rates to avert a recession while European policy makers will keep rates unchanged. Interest-rate futures showed a 96% chance that the Fed will lower the Fed's target rate by 50 basis points to 2.5% on March 18.

The single currency extended gains against the dollar to a three-week high of 1.4863 after a report showed European service industries accelerated more than forecast in February. The eurozone service PMI rose to 52.3 in February, well above the expectation of 50.8 and the reading of 50.6 in January. The eurozone manufacturing PMI came in as expected at 52.3.

European Central Bank council member Athanasios Orphanides said the bank's ‘primary concern’ remains ‘elevated inflation’. However, the single currency retreated briefly to 1.4792 in U.S. session on position adjustment ahead of the weekend together with cross unwinding in euro especially versus the Japanese yen on the initial selloff in U.S. stocks and then rebounded and closed at 1.4825 as U.S. stocks recovered all the losses and rallied in late trade after CNBC television reported that a bailout for bond insurer Ambac Financial Group Inc. was imminent and may be announced next week, causing financial shares to reverse losses.

The British pound rose from 1.9610 to 1.9710 before closing at 1.9670 on Friday. The greenback tumbled against the Swiss franc from 1.0919 to 1.0835 on risk aversions as investors bought chf across the board. Eur/chf fell sharply from 1.6168 to 1.6073. U.S. currency fell versus the Japanese yen from 107.58 to 106.71 and then trimmed losses on renewed cross selling in jpy on late rally in U.S. stocks.

Australian dollar retreated briefly versus the U.S. currency from 0.9251 to 0.9178 before closing at 0.9225 on speculation that the Reserve Bank of Australia will raise borrowing costs a quarter-point to 7.25% next month. New Zealand dollar rallied against the greenback from 0.7989 to 0.8103 (just below the record high of 0.8110 made on July, 2007).

Next week will see the release of German import price and U.S. existing home sales on Monday; Japan’s CSPI, German GDP and Ifo index, U.K. CBI distribution trade, U.S. PPI, consumer confidence and house price index on Tuesday; German Gfk index, U.K. GDP, imports and exports, U.S. durable goods and new home sales on Wednesday; Japan’s industrial production and retail sales, German unemployment rate, U.S. GDP, personal consumption, core PCE and jobless claims on Thursday; Japan’s manufacturing PMI, Tokyo CPI, unemployment rate, housing starts and construction orders, German CPI and HICP, eurozone HICP, business climate and economic sentiment, U.K. Gfk survey, U.S. personal income, spending, Chicago PMI and University of Michigan survey on Friday.