Dealers and investors in London returned to push the greenback to within 1 percent of December's long-term highs.
Oil prices fell as the U.S. dollar strengthened, making greenback-denominated commodities like crude more expensive to some buyers.
Gold erased earlier losses to trade sharply higher on Tuesday, shrugging off the dollar's buoyant start to the new year.
U.S. stock index futures pointed to a higher open on Tuesday as traders eyed key data releases on the first trading day of 2017.
Asian markets gained on Tuesday, after China's Caixin PMI for December came in stronger than expected.
European markets started the new year on a negative footing but have reversed losses during mid-morning trading.
U.S. stocks ended the year with three straight days of losses for the first time since Nov. 4.
U.S. government debt prices were lower on Friday, as investors geared up a new trading year, set to get into full swing next week.
The dollar recovered from a two-week low against a basket of six major currencies.
This comes on the back of an agreement struck between OPEC and non-OPEC countries to cut crude production output.
Gold was set to close 2016 up more than 9 percent for its first annual gain in four years, edging higher on the back of a weaker dollar.
U.S. stock index futures pointed to a higher open on Friday, with data and oil set to be on the agenda as traders look ahead to 2017.
European bourses closed higher on the last trading day of 2016 after opening in the red.
South Korean shares wavered on Monday, while India shares stumbled, but Hyundai Motors jumped after releasing higher annual sales targets.
Asian shares were mixed on the last trading day of the year, with Hong Kong and Taiwan in the lead.
U.S. stocks were lower Thursday as investors digested economic data and looked ahead to 2017.
U.S. stock index futures pointed to a flat open on Thursday, as investors prepared to wade through more data.
U.S. government debt prices were higher on Thursday, as investors got ready for more economic data.
Markets in Europe ended lower Thursday as the light Christmas trading period continues.
Weaker-than-expected economic data weighed on the greenback and waning risk appetite boosted Japan's safe-haven currency.