The euro drifted higher against its key counterparts in European morning deals on Friday, as European markets rallied following dovish minutes of the Federal Reserve's September meeting, which indicated that chances of a rate hike this year are waning.

The minutes showed that members were concerned about the risks to the outlook for economic activity and inflation, although the situation did not materially alter their outlook for the U.S. economy. Dovish comments from the Bank of England and the European Central Bank also reinforced the view that global market liquidity will remain ample for a very long time. The Bank of England's rate-setting committee voted 8-1 to keep interest rates at record low on Thursday, saying labor costs aren't yet strong enough to push inflation back to its 2 percent target.

The minutes of the European Central Bank's September meeting noted that downside risks to the outlook for inflation had increased and more time was needed to gauge the effect of financial market volatility and slower growth in China.

In other economic news, data from the statistical office Insee showed that French industrial and manufacturing output expanded at the fastest pace in more than two years in August.

Industrial production grew 1.6 percent on a monthly basis in August, reversing a 1.1 percent fall in July. It was the fastest growth since April 2013, when it climbed 2.1 percent. Growth also exceeded a 0.6 percent rise forecast by economists.

The euro showed mixed trading in the Asian session. While the currency rose modestly against the yen and the franc, it was steady against the greenback. Against the pound, the euro trended lower.

In European trades, the euro advanced to 3-week highs of 1.1347 against the greenback and 136.31 against the yen, off its early lows of 1.1267 and 135.05, respectively. The euro ended Thursday's trading at 1.1275 against the greenback and 135.21 against the yen. The euro is seen finding resistance around 1.15 against the greenback and 137.5 against the yen.

The euro spiked up to a 2-day high of 0.7384 against the pound, after having fallen to 0.7336 at 9:30 pm ET. At yesterday's close, the pair was valued at 0.7343. On the upside, the euro is likely to find resistance around the 0.75 mark.

The euro rose to 1.0919 against the franc, reversing from its prior 2-day low of 1.0880. The pair was valued at 1.0888 when it finished Thursday's deals. If the euro-franc pair extends rise, it may possibly find 1.10 as next resistance level.

Meanwhile, the risk-on mood dampened the demand of safe-haven currency, the Japanese yen.

The yen fell to a 3-week low of 124.92 against the Swiss franc and more than a 2-week low of 184.82 against the pound, from early highs of 123.93 and 183.92, respectively. The next possible support for the yen is seen around 126.50 against the franc and 188.00 against the pound.

The yen weakened to a 2-day low of 120.22 against the greenback, more than 1-1/2-month lows of 88.04 versus the aussie, 80.70 against the kiwi and 92.98 versus the loonie, coming off from its prior highs of 119.84, 86.89, 79.79 and 92.06, respectively. The yen is poised to find support around 122.00 against the greenback, 95.00 against the loonie, 82.00 versus the kiwi and 90.00 against the aussie.

Looking ahead, Canada unemployment rate for September, U.S. import price index for September and wholesale inventories for August are slated for release in the New York session.

At 9:10 am ET, Federal Reserve Bank of Atlanta President Dennis Lockhart is expected to speak about the US economic outlook and monetary policy at the University of New York's Graduate School of Journalism.

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