The U.S. dollar rose on Friday and posted a largest one-day gain against the euro in more than two months as investors speculated that the ECB may be the next to purchase its own bonds to stimulate growth while falling U.S. stock markets also drew safe-haven bids toward the dollar. In late New York trading, the dollar index rose 1.2 percent and last trading at 85.141.

The single currency tumbled after eurozone reported industrial orders in the region plunged in January with comments from German Finance Minister Peer Steinbrueck suggested fiscal irresponsibility in Europe could put the euro at risk also pressured the currency. The euro fell against the dollar to as low as 1.3256 and 129.39 against the yen before stabilising, dropped 1.8 percent to $1.3290 and 2.6 percent to 130.13 yen respectively in late New York session.

Sterling also tumbled to a one-week low against the greenback at $1.4268 as data showing the U.K. suffered the biggest contraction in economic growth in the fourth quarter of last year. The British pound was last down 0.8 percent at $1.4320.

The dollar's broad-based strengths was also supported by comments from a senior Russian central bank official and the IMF's managing director, saying that the dollar will remain the world's reserve currency for some time. The dollar rose to as high as 1.1483 versus the Swiss franc and pared some of its losses versus the yen, last trading up 1.4 percent at 1.1435 franc and down 0.8 percent 97.91 yen in late New York session.

U.S. stock markets tumbled on Friday as investor took profits following a recent surge and comments from JP Morgan Chase’s executive that March was a tougher month for the banking industry than the previous month. By the end of New York trading, the Dow Jones Industrial average fell 148 points, or 1.87 percent to 7,776, while Standard & Poor’s 500 index and Nasdaq Composite index dropped 2.03 percent and 2.63 percent to 815 and 1,545 respectively.

On the data front, a report from Britain showed the U.K. economy shrank 1.6 percent in the fourth quarter, the biggest slump since 1980 while the European Union statistics office said eurozone’s industrial orders declined 34 percent in January, the biggest drop since the data series started in 1996. Other reports from the Commerce Department in Washington showed the growth in spending by American consumers slowed in February (0.2 percent versus 0.6 percent in previous month) and incomes fell by 2 percent, more than forecast of a fall of 0.1 percent.

Economic data due out in the upcoming week includes Japan industrial production and eurozone business climate and economic sentiment on Monday, U.K. Gfk survey, Japan unemployment rate, household spending, housing starts and construction orders, German unemployment data, Canada GDP and PPI, and U.S. Chicago PMI and consumer confidence on Tuesday, Australia retail sales, Japan Takan reports, German, eurozone and U.K. PMI manufacturing, and U.S. ADP employment, construction orders, ISM manufacturing and pending home sales on Wednesday, Australia trade balance, ECB rate decision and U.S. weekly jobless claims and Factory orders on Thursday, and Switzerland’s CPI, PMI services in German, eurozone and U.K., and U.S. non-farm payrolls, unemployment rate and ISM non-manufacturing on Friday.