The dollar weakened against the euro and yen as investors adjusted positions ahead of the weekend and next week's U.S. Federal Reserve policy-setting meeting.
After last Friday's weaker-than-expected U.S. non-farm payrolls data, many traders and analysts expect the central bank to announce a modest $10 billion reduction to its $85 billion monthly bond-buying program.
"The market is definitely less concerned about tapering. The tapering is not being viewed as negatively as it was in the recent past," said Alvise Marino, currency strategist at Credit Suisse in New York.
Trading was volatile, however, with disappointing U.S. data and talk that former Treasury Secretary Larry Summers was about to be named as the next chairman of the Fed, buffeting the dollar during the early New York session.
But as trading volume dried up going into the weekend, the greenback lost ground against the euro and yen.
The dollar index was last at 81.49, down only slightly on the day, but well off the two-week low of 81.356 set on Thursday.
The euro was flat at $1.3296.
The dollar was last down 0.3 percent at 99.29 yen, off an intraday high of 99.97 yen.
Analysts said although the dollar has recently struggled to stay above 100 yen, the uptrend was still intact.
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