The dollar extended declines against the yen and fell versus the euro, after U.S. stocks accelerated their losses.
The euro rose 0.2 percent to $1.5776.
Against the yen , the dollar last traded lower at around 106, a session low.
"Having stocks now officially in bear territory certainly adds another psychological damp on the dollar," said Joe Manimbo, a currency trader at Ruesch International in Washington.
The yen hit a three-week high against the dollar and rebounded from a record low against the euro as investors reduced risk exposure amid record high oil prices, slumping stocks and fears about U.S. growth.
Antipathy to risk also lifted the safe-haven Swiss franc to a three-week peak against the dollar.
The franc also rose after Russia's central bank said it plans to increase the currency's share in its $558.7 billion gold and foreign exchange reserves.
The oil price hit a record above $142 a barrel.
So far this year, it has gained more than 47 percent, heightening global inflation concerns.
"Weakness in equity markets coupled with a continuation of the theme of upside inflation and downside growth surprises has seen risk aversion re-enter as a theme for foreign exchange markets," said Divyang Shah, senior currency strategist at Commonwealth Bank in London.
The euro also fell versus the yen, a stark reversal from the prior session's surge to 169.45, an all-time high.
The dollar hit its lowest against the Swiss franc since June 9 at 1.0168 francs before rebounding slightly, still down from late Thursday.
"There is a bout of risk reduction across assets," said Martin McMahon, FX strategist at Credit Suisse in Zurich.
"It's probably got further to run, and being in the Swiss franc is a good place to be, and in the yen to a certain extent as well."
The greenback drew little support from a report showing underlying U.S. inflation pressures eased slightly in May, further undermining the case for the Federal Reserve to hike interest rates to offset the impact of high oil prices.
The Fed left interest rates on hold at 2 percent on Wednesday, and while it said inflation risks have increased, it did nothing to convince markets of an imminent rate hike.
The European Central Bank, by contrast, has all but assured markets that it will raise its refinancing rate from 4 to 4.25 percent next week, and that has helped the euro rise 0.7 percent against the dollar this week.
The euro showed little reaction to a report that euro zone economic sentiment fell more than expected this month, and analysts said it was not likely to deter the ECB from raising rates.
Indeed, inflation remains a top concern across the 15-country euro zone.
Spanish consumer price inflation hit a record high of 5.1 percent in June, while inflation also rose in five German states EU Economic and Monetary Affairs Commissioner Joaquin Almunia said on Friday that euro zone inflation will stay high for longer than previously expected and that oil and food prices may rise further.