By James Glynn

SYDNEY -- The euro rallied sharply in Asia trading Friday, climbing more than two U.S. cents in a move that had traders scratching their heads.

The euro jumped from around $1.0490 to briefly trade above US$1.0700 in a matter of moments -- its highest level in two weeks -- against a backdrop of thin year-end markets.

The euro's short-lived surge also lifted the U.K. pound and the Australian and New Zealand dollars, traders said.

At 0310 GMT, the euro was trading at $1.0531. The British pound jumped from $1.2250 to $1.2309, before pulling back to around $1.2278.

Before the spike in the euro, the pound was part of broad market strength against the U.S. dollar, which was under pressure amid end-of-year book squaring and profit-taking.

Overnight, the WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.5% to 93.06. Despite the overnight slide, the dollar is on track to end 2016 with a gain of more than 3%.

Ray Attrill, global head of currency strategy at National Australia Bank, said that trying to explain the move would be folly.

"Whether somebody accidentally pressed a button or algo trades were triggered, nobody knows," Mr. Attrill said.

"If they tell us anything about what January has in store, it may be that it's going to be a choppier ride for the dollar relative to the cozy dollar-bullish consensus that prevailed in the run up to Christmas, " he added.

Elias Haddad, senior currency strategist at the Commonwealth Bank of Australia, agreed there wasn't much to explain the euro's sudden rise.

"Volume is too thin right now to draw any conclusion from this move," he said.

Asian currencies largely escaped the volatility and were little changed.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

December 29, 2016 22:56 ET (03:56 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.