Dollar Flat in Holiday-Thinned Trade

The dollar was flat against the euro on Friday in holiday-thinned trade, as traders sought to cover positions ahead of the three-day U.S. weekend.

Investors continued to show more taste for the single currency after Italy accepted fresh austerity measures and following positive U.S. jobs data, traders said.

The euro was stable at $1.3040 against $1.3050 in New York late Thursday.

"A combination of Italian Prime Minister Mario Monti's success in gaining approval for his austerity package and continuing economic progress in the U.S. is the catalyst for the markets drive at present," said Spreadex trader Jordan Lambert.

Italy's senators gave their approval on Thursday to austerity tax increases and pension reforms in a bid to avoid bankruptcy for the Eurozone’s third-biggest economy as a recession looms.

Trade continued to get a bounce from news that U.S. new claims for jobless benefits last week fell to the lowest level since April 2008, with fewer layoffs in most states.

Tepid data on US consumer income and spending failed to dampen spirits ahead of the Christmas holiday weekend.

Earlier in the day the dollar had weakened against the euro, amid more optimism.

"The U.S. dollar fell versus commodity-linked currencies in the North America trading session today amid a surge in risk appetite," said Trang Nguyen of DailyFX.

The dollar was virtually unchanged at 0.9370 Swiss francs and, while the pound strengthened to $1.5589 from $1.5673.

The dollar bought 78.06 yen versus 78.15 the day before.