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NEW YORK - The dollar traded in a narrow range Friday as the market mulled a series of currency measures by the Chinese central bank that could help ease Sino-US trade frictions by boosting the yuan.

The Canadian dollar meanwhile jumped to a 30-year high on the greenback as markets anticipated a rebound north of the border and possibly a hike in interest rates.

The euro was changing hands at 1.3504 dollars at 2100 GMT, against 1.3492 in New York late on Thursday.

The yen pared early gains made upon the Chinese news, since the Japanese currency often is seen as a proxy for the yuan.

The dollar was changing hands at 121.10 yen, against 121.29 in New York on Thursday.

Earlier on Friday the People's Bank of China said it will raise benchmark deposit rates by 0.27 percentage points, while lending rates will be increased byc0.18 points.

It will also widen the daily fluctuation band for the yuan, allowing it to appreciate at a faster rate over time.

The moves "will allow the renminbi (yuan) to strengthen at a faster paced against the dollar, at least in theory," said economist Jay Bryson at Wachovia Securities.

This could also give a boost to US exports and possibly help shrink the massive US trade deficit with China, some observers said.

Some analysts said Chinese authorities are walking a fine line as they try to cool the red-hot economy and ease trade frictions without sending shock waves through the global financial system.

"As we have seen in the past, China's efforts to tighten the money supply have caused serious global ripples," said John Kicklighter at Forex Capital Markets.

"It will be interesting to see how the (Chinese) equities markets respond to the announcement Monday morning to signal what is in store for the carry trade and the rest of the globe."

The yen rose initially as markets assumed the Chinese decision would feed into faster currency appreciation throughout the rest of Asia.

However, the yen later retreated, with analysts saying China's move would have little impact for other currencies.

Analysts also pointed out that China's move was mainly a cosmetic one, coming ahead of a meeting of finance ministers from the Group of Eight industrialized nations and a key bilateral economic meeting in Washington.

Meanwhile a stronger-than-expected US consumer confidence indicator gave the dollar some initial support, but it later slipped back against both the euro and the pound.

The University of Michigan consumer sentiment index rose to 88.7 in May from 87.1 in April, above market expectations for a fall to 86.5.

Kicklighter said some traders may have been looking for an even stronger number, which might suggest the US economy is gathering momentum.

"Some of the strength underlying the recent dollar pick up may have been towed by speculation of a big upset from the consumer that would allow for more certainty of an impending rebound in GDP," he said.

In late New York trade, the dollar strengthened to 1.2271 Swiss francs from 1.2268 on Thursday.

The pound was being traded at 1.9745 dollars after 1.9746.

The Canadian loonie meanwhile soared to 91.94 US dollars, its best level since October 1997, before setting at 91.79.

Its jump in value is due to "growing anticipation of a key interest rate hike by the central bank," TD Securities analyst Marc Levesque told AFP.

Agence France-Presse