TOKYO - The dollar firmed against the yen in Asian trade Friday after surprisingly strong US economic news raised hopes that recovery may be taking root in America.

The dollar strengthened to 96.68 yen in Tokyo morning trade from 96.55 in New York late Thursday. The euro was steady at $1.3905 and firmed to 134.41 yen from 134.23.

The greenback was boosted after business research firm The Conference Board said its May index of leading economic indicators, a measure of conditions in the coming months, rose 1.2 percent from April, beating forecasts for 1.0 percent.

A Philadelphia Federal Reserve survey on regional manufacturing was also better than expected, while a report on weekly jobless claims was roughly in line with expectations and offered hints that more unemployed are finding jobs.

While the US unit in recent months has served as a safe haven from global financial uncertainty, investors have begun to shift to other currencies based on the strengths of those currencies' respective economies, dealers said.

"As the level of panic in financial markets is falling, traders are changing gears on buying currencies that attest to strength in the global economy," said Sumitomo Trust and Bank forex strategist Jitsuo Tachibana.

But other investors warned that concerns over the health of America's public finances with its massive budget deficit are likely to cast a shadow over the recent encouraging data.

Washington will issue a record $104 billion in new bonds next week, and traders "will be nervously watching for how this jump in supply is absorbed with implications for the dollar and bond yields," wrote NAB Capital strategists in a note.

The auction comes as the Obama administration unveiled a financial overhaul that includes expanding the power of the Federal Reserve to oversee regulation on all risky finance firms or lenders.

Investors will also be waiting for the Fed's monetary policy meeting beginning next Tuesday for clues on the outlook for interest rates.