The Federal Reserve should leave short-term borrowing costs near zero for a seventh year in a row, a top Fed official urged on Thursday, citing sliding U.S. inflation and still-high unemployment.

The number of Americans filing new claims for unemployment benefits fell last week and job cuts declined sharply in December, suggesting the labor market is tightening.

U.S. stocks rallied for a second day on Thursday, boosted by expectations the U.S. economy will continue to improve and by hopes for more aggressive action from the European Central Bank.

Asian stocks rose on Thursday after upbeat U.S. employment data and a halt to a slide in oil tempered investor risk aversion, while the euro held near a nine-year low.

U.S. stocks rebounded on Wednesday from five straight sessions of losses after strong private sector jobs data and as minutes from the most recent Federal Reserve meeting reassured investors the bank was in no hurry to start raising interest rates.

The euro hit a nine-year trough on Wednesday as collapsing oil prices and worries about the world economy drove skittish investors into the arms of safe-haven sovereign debt.

The U.S. dollar hit its highest level against major currencies in over 8-1/2 years on Friday on diverging monetary policy between the Federal Reserve and other major central banks, and bullish dollar positions heading into the end of the year.

The Federal Reserve on Wednesday offered a strong signal that it was on track to raise interest rates sometime next year, altering a pledge to keep rates near zero for a "considerable time" in a show of confidence in the U.S. economy.

The S&P 500 scored its best day since October 2013 on Wednesday as the Federal Reserve gave an upbeat assessment of the economy and said it would take a patient approach toward lifting interest rates.

U.S. manufacturing output recorded its largest increase in nine months in November as production expanded across the board, pointing to underlying strength in the economy.