The euro on Friday rose against the dollar to its highest since April in the wake of encouraging remarks from the head of the European Central Bank, while an improving economic outlook held world stock prices near a 20-month high.
A massive stimulus plan in Japan also boosted optimism about future business activity, but worries about global demand, a pickup in Chinese inflation and a possible drag from the debt ceiling fight in Washington spurred selling in the oil market. As stocks and the euro gained appeal, investors trimmed back their safe-haven holdings of US and German government debt before a late wave of buying emerged.
"The world economy seems to be in the beginning of a cyclical upturn. That's going to benefit economic sensitive sectors," said David Joy, chief market strategist at Columbia Management Advisors in Boston. While Japan aims to jumpstart its economy, US and European central bankers have talked up the prospects for their economies in the past 24 hours.
Philadelphia Federal Reserve Charles Plosser on Friday repeated his outlook that the US economy will likely grow about 3% in 2013, bringing the jobless rate down to 7% by year-end. Plosser's remarks followed mildly upbeat comments from St. Louis Fed chief James Bullard on Thursday.
Comments by ECB President Mario Draghi following the central bank's policy meeting on Thursday, suggesting Europe's economy is set for a recovery in 2013, have raised bets that global growth might gather momentum this year. The MSCI index of world shares held steady at 349.74 after rising earlier to 350.15, the highest level since May 2011. It was on track for a weekly gain of 0.56%, following a 3.11% rise last week.
On Wall Street, the three major stock indexes were narrowly mixed. The Standard & Poor's 500 index was a hair below its five-year closing high on Thursday but was still poised to eke out a weekly increase of 0.33%. The Dow Jones industrial average was up 15.19 points, or 0.11%, at 13,486.41. The S&P 500 was down 0.64 points, or 0.04%, at 1,471.48. The Nasdaq Composite Index was up 2.03 points, or 0.07%, at 3,123.79.
Meanwhile, Dow component Boeing stock lost 2.7% at $74.99 on news of problems with its Dreamliner jets. Europe's FTSEurofirst 300 index of top companies across the region also neared levels last seen in March 2011 shortly after the ECB decision and was consolidating those gains on Friday.
In Tokyo, the Nikkei index closed 1.4 percent higher at 10,801.57 for a ninth straight week of gains, the longest such streak since 1998. The yield on benchmark US 10-year Treasury notes fell 3 basis points on the day to 1.87% after rising to a session high of 1.93%.
Gold prices fell 0.78% at $1,661.49 an ounce as the firmer tone to the dollar prompted some buyers to cash in gains after the metal's biggest one-day rise so far this year. On the week, bullion managed a rise of 0.32%.