The dollar extended its rally against all major foreign currencies Friday on increased confidence in the U.S. economy, doubt about the economic situation in Germany, and reverse market sentiment on interest rates.

The dollar continued to build up on top of strong gains Thursday when it rose 2.2 percent against the German mark, 1.18 percent vs. the Japanese yen and 1.90 percent on the British pound on encouraging trade and employment figures.Economists and currency analysts had long been expecting U.S. interest rates to go down and German rates to go up, but the Federal Reserve indicated easing was not in the cards, while the Deutsche Bundesbank simply did not move Thursday.

But Bundesbank President Karl Otto Poehl attempted to reverse the run on the mark by telling bankers in Frankfurt "there is no consideration of loosening of the reins of monetary policy."

In late New York trading, the greenback surged to 1.7365 German marks from 1.7052 late Thursday.

The dollar was also higher against the Japanese currency, at 138.40 yen vs. 137.80. Earlier in Tokyo, the dollar rose to 137.90 yen from 136.27.