The dollar index (DXY), which tracks the performance of the dollar against a trade-weighted basket of six major currencies, rose 0.6% to 87.13, up from 86.533 in North American activity late Thursday.
U.S. nonfarm payrolls plunged by 533,000 in November, the worst job loss in 34 years, the Labor Department reported Friday. Economists had expected job losses of around 350,000.
In addition, the unemployment rate rose from 6.5% in October to 6.7% in November, the highest jobless rate since October 1993.
"What's happened recently is that weak U.S. data -- and this is certainly weak -- have raised concerns about the U.S. and global economy and that's actually benefited the U.S. dollar," said Meg Browne, currency strategist at Brown Brothers Harriman & Co.
"With jobs so weak, it's a negative outlook and it means that the deleveraging process could continue," Browne said. "What's the safe haven currency -- it's the U.S. dollar. The yen is a beneficiary as well."
Euro, pound under pressure
The euro slumped 0.7% to $1.2687, down from $1.2786, as Germany's economics ministry reported an unexpectedly large drop in October manufacturing orders. The euro hit an intraday low of $1.2627.
The British pound fell 0.5% to $1.4619, up from $1.4684
The dollar, however, declined 0.4% versus the Japanese currency, changing hands at 91.86 yen compared with 92.22 yen Thursday.
The dollar came under pressure Thursday, sinking after the Bank of England and the European Central Bank made historic cuts in key interest rates.
The Bank of England slashed its key rate by a full percentage point to 2% -- matching the lowest benchmark rate since the central bank's founding in 1694.
The ECB made the largest cut in its 10-year history, dropping its key rate by 75 basis points, or three-quarters of a percentage point, to 2.5%.
Still, "the post-rate decision market reaction was lukewarm; neither the BOE nor the ECB surpassed the most aggressive of market rate expectations and so the euro and sterling rallied modestly," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange.
The pound sank to a six-and-a-half year low versus the dollar ahead of the rate decision and hit an all-time low versus the euro before rebounding.
Remarks by ECB President Jean-Claude Trichet in his news conference following Thursday's decision were ambiguous on prospects for a January rate cut, although most economists have penciled in further, aggressive easing in the months ahead.
"As we all know, Trichet can be pretty darn clear when he wants to - but not yesterday," Gallo said. "We think that there are some big splits among ECB policymakers, and this could easily hinder further policy easing" in the first quarter of 2009.
But delay would be postponing the inevitable, he added.
"The longer the ECB takes, the more likely it is the euro will be the main loser during the second half of the year," Gallo said.
German manufacturing orders saw a seasonally-adjusted 6.1% monthly fall in October, according to news reports. Economists were looking for a modest rise of 0.4% after a downwardly revised September plunge of 8.3%.
Strategists at BNP Paribas said euro and sterling could be in for some renewed pressure amid the inability of equity markets to move higher.
Weaker equities and increased risk aversion have boosted the dollar and the Japanese yen.
"With equity markets failing to gain any support from the current monetary policy easing, we now expect the euro, and particularly sterling, to come under renewed downward pressure, while the U.S. dollar is set to extend its broad-based recovery over the medium term," they wrote.
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