The dollar strengthened Friday against the euro and the yen but edged lower against the pound, after gaining the day before on a sharp drop in the number of people applying for U.S. jobless benefits. The British pound rose slightly to $1.8376 from $1.8349 in late New York trading, while the dollar bought 107.61 Japanese yen, a tad higher than 107.59 yen in New York. The yen showed little reaction to the Bank of Japan's widely expected decision Friday to temporarily relax the targets set for extra cash in the financial system. The central bank kept its target unchanged, and Japan continues to keep its interest rates basically at zero to encourage a fragile recovery. Many market participants say expectations for higher U.S. interest rates and strong economic growth could push the dollar higher. Prospects for higher interest rates as well as bright news about an economy tends to boost the value of that nation's currency. The U.S. Labor Department reported Thursday that new applications filed for unemployment insurance declined by a seasonally adjusted 20,000 to 321,000 for the week ending May 14. The decline, larger than expected, pleased economists. It marked the biggest drop in claims seen in a month.