The euro rose against the dollar and the yen on Friday as Spain's budget boosted hopes one of the euro zone's larger economies would tighten its belt even though long-term worries about the region's growth could cap the currency's gains.

Spain presented a budget that aims to save more than 27 billion euros in 2012 through spending cuts and revenue increases, reassuring markets that the country would stick to austerity.

The euro turned around early losses to rise against the yen after the budget release. The single currency had already been up against the dollar after euro zone finance ministers agreed to raise their financial firewall to prevent a new flare-up of Europe's sovereign debt crisis.

To some extent Spain sticking to its strict austerity measures will prove supportive in the very near term for the euro, said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange in Washington, D.C.

But he cautioned that many of the underlying causes of the euro zone sovereign debt crisis, such as growth differentials among the region's economies, remain in place.

It's just hard to get really bullish on the euro, even when you see relatively good news, he added.

The euro rose 0.27 percent against the dollar to $1.3337 and gained 0.21 percent to 109.85 yen in choppy trading.

Traders said the dollar was also weighed down by selling related to month-end moves by portfolio investors. The greenback slipped 0.04 percent to 82.37 yen.

The single currency was on track for its best quarter against the dollar in a year, benefiting after the European Central Bank's second injection of cheap long-term funds helped ease euro zone debt worries.

Both the euro and the dollar were set for strong performances against the yen in the first quarter. The yen has struggled since the Bank of Japan boosted its asset-buying program in February. That move, as well as the threat of more easing, has kept the yen on the back foot.

The dollar was tracking an advance of about 7 percent against the yen this quarter. The euro's performance against the yen was even stronger - a climb of around 10.4 percent, its best quarterly performance since the end of 2000.

EURO STILL VULNERABLE

Many analysts expect the euro could resume its decline in the coming quarter on concerns about indebted peripheral countries and the prospect that a large economy such as Spain or Italy may need help.

The key question is whether it is possible for those countries to compete on the global market, said Anders Soderberg, currency strategist at SEB in Stockholm.

For each set of austerity measures they announce, the economy takes a step lower.

U.S. data will also be key in the second quarter, including a non-farms payroll release slated for next Friday that could help set the tone.

A recent run of optimism over the world's largest economy could be setting markets up for disappointment in coming weeks, said Stewart Hall, a senior currency strategist with RBC Capital Markets in Toronto.

We don't even to see the U.S. data tail off, just a lack of progression, he said.