The dollar continued its run of gains versus the yen but struggled in thin trade against its European counterparts Friday morning in New York. Activity was light, with many markets around the world closed. Meanwhile, traders at their desks were bracing for another round of key economic figures and next week's release of bank stress tests.

The manufacturing industry is likely to be in focus on Friday, with the Institute for Supply Management due to release its report on manufacturing activity in the month of April and the Commerce Department due to release its report on March factory orders.

At 9:55 a.m. ET, the University of Michigan releases its reading on consumer sentiment.

The dollar extended this week's dramatic comeback versus the yen Friday morning, rising to a nearly 2-week high of 99.33 before leveling off. With the advance, the dollar moved closer to 3-month high of 101.43, set in early April.

Japanese core inflation eased 0.1 percent on year in March, the Cabinet Office said on Friday, marking the first annual decline since September 2007. Analysts had been expecting a 0.2 percent decline following a flat performance in April.

Overall national inflation was down 0.3 percent on year, in line with forecasts following a 0.1 percent annual decline in February.

The dollar softened versus the euro and sterling on increased risk appetite as Tokyo stocks advanced and US stock futures pointed to a consolidation of April's big gains. April was the best month for US stocks since 1938, with market players betting that the worst of the global economic crisis is behind us.

The dollar eased slightly versus the euro, slipping to 1.3327. Earlier in the week, the dollar slid to a 2-week low of 1.3385, a full 10 cents from its multi-year highs set last autumn during the darkest days of the financial crisis.

Against the sterling, the dollar tested its 2-week lows from the previous session, slipping a penny to 1.4900. A move to 1.4950 would bring the dollar to its lowest level since mid-April.

Indicating that the pace of decline in the UK's manufacturing sector eased in April, the CIPS/Markit purchasing managers' index, or PMI, climbed to 49.2 from a revised 39.5 in March, reports said Friday, citing data from the Markit Economics. Meanwhile, economists had expected a reading of 40.

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