TOKYO - The euro traded in a narrow band against the dollar Friday, on improved risk sentiment spurred by gains in Asian stock markets, dealers said.

The dollar also firmed against the yen on strong US economic data, further boosting Japanese stocks.

The euro fetched US$1.3301 (S$1.6640) and 108.32 yen (S$1.67) in Tokyo afternoon trade, compared with US$1.3311 and 107.97 yen in New York.

The dollar was changing hands at 81.43 yen against 81.10 yen in New York.

"No fresh news is behind the rise, but risk sentiment is improving," a trader at a major Japanese bank told Dow Jones Newswires.

Dai Sato, vice president of the currency division at Mizuho Corporate Bank, said the single currency could move in either direction after a recent round of buying subsided.

"The euro lacks energy to power higher after it looks like short-covering was complete," he said.

Meanwhile the dollar's climb against the yen continued.

Tokyo stocks hovered around 0.70 per cent higher than their Thursday close, helped by a cheap yen and positive US jobs and retail data that pushed up shares on Wall Street overnight.

Chinese, Hong Kong, Taiwanese and South Korean stocks all saw gains Friday.

Investors' eyes are on figures for Japan's current account due out next week and US jobs data due out later Friday, as well as a European leaders' summit, Masafumi Yamamoto of Barclays Capital said in a note to clients.

"The focus is whether European leaders will agree on expanding the ESM," Yamamoto said, referring to the European Stability Mechanism to fight debt turmoil.

Eurozone leaders decided at the summit on Thursday to pour cash into the ESM faster than initially agreed, the bloc's president said, in a bid to boost market confidence.

The ESM is a permanent bail-out pot due to come into force in July and eventually replace the temporary EFSF fund.

Germany, Europe's top economy and political heavyweight, is steadfastly against a move to expand the funds, although Chancellor Angela Merkel has reportedly softened her opposition. The meeting continues Friday.

The dollar was mixed against other Asian currencies.

It eased to Sg$1.2486 in Tokyo afternoon trade from Sg$1.2490 the previous day, to 42.67 Philippine pesos from 42.73 pesos, and to 1,115.50 South Korean won from 1,116.80 won.

But the US unit rose to 9,118.00 Indonesian rupiah from 9,108.12, while staying nearly unchanged at 30.48 Thai baht and Tw$29.41.