The U.S. dollar drifted lower against its major counterparts in the European session on Friday, despite the release of upbeat jobs data for February that backed hopes for an increase in interest rates at next week's Federal Reserve meeting.

Data from the Labor Department showed that non-farm payroll employment jumped by 235,000 jobs in February after surging up by a revised 238,000 jobs in January.

Economists had expected employment to climb by about 195,000 jobs compared to the addition of 227,000 jobs originally reported for the previous month.

With the stronger than expected job growth, the unemployment rate edged down to 4.7 percent in February from 4.8 percent in January, matching expectations.

The report also said the annual rate of growth in average hourly employee earnings accelerated to 2.8 percent in February from 2.5 percent in January.

The US Federal Reserve kicks off a two-day meeting next week with the decision expected at 2:00 pm ET Wednesday. Economists are predicting a 0.25 percent boost in benchmark rate to a range of 0.75 percent - 1 percent.

Fed officials, including Chairwoman Janet Yellen, had already strongly hinted at a March hike in their statements lately, given solid economic growth.

The greenback showed mixed performance in the Asian session. While the currency held steady against the pound and the franc, it dropped against the euro. Against the yen, it rose.

The greenback pared gains to 1.0107 against the Swiss franc, from a high of 1.0139 hit in the immediate aftermath of the jobs data. The greenback is likely to target support around the 1.00 zone.

Following near a 2-month high of 115.50 hit at 8:00 am ET, the greenback retreated to 115.12 against the Japanese yen. Continuation of the greenback's downtrend may see it challenging support around the 114.00 region.

Data the Ministry of Finance showed that Japan's large manufacturing conditions deteriorated in the first quarter of 2017, with a score of 1.1.

That was down sharply from 7.5 in the previous three months, and well shy of expectations for 8.4.

Extending early slide, the greenback slipped to a 4-day low of 1.0634 against the euro. The greenback is poised to challenge support around the 1.08 mark.

Data from Destatis showed that Germany's wholesale prices increased the most in more than five years in February.

Wholesale prices advanced 5 percent in February from prior year, following a 4 percent increase in January.

The greenback gave up some of its early gains against the pound with the pair trading at 1.2170. This may be compared to a high of 1.2136 hit immediately after the release of the data. The next possible support for the greenback may be located around the 1.235 zone.

Data from the Office for National Statistics showed that the UK visible trade deficit remained broadly unchanged in January.

The deficit on trade in goods, came in at GBP 10.83 billion versus GBP 10.91 billion shortfall in December.

The greenback dropped to 2-day lows of 1.3427 against the loonie and 0.7556 against the aussie, from its previous highs of 1.3515 and 0.7498, respectively. Further weakness may see the greenback challenging support around 0.77 against the aussie and 1.33 against the loonie.

Reversing from an Asian session's rise of 0.6891 against the kiwi, the greenback slipped to a 2-day low of 0.6941. If the greenback extends decline, 0.70 is possibly seen as its next support level.

Looking ahead, U.S. Baker Hughes rig count data is set to be announced in the New York session.

At 2:00 pm ET, U.S. Federal Reserve monthly budget balance statement is due.

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