The U.S. government reported that the American economy contracted during January, February and March because of heavy snowfalls, a resurgent dollar and disruptions at West Coast ports.
The government slashed its gross domestic product estimate to show GDP shrinking at a 0.7 percent annual rate instead of the 0.2 percent growth pace it estimated last month.
Economists point to bad weather and other unusual circumstances in early 2015 and caution against reading too much into the slump, which could oblige Fed policymakers to delay ending an era of near-zero U.S. rates.
More recent data published on Thursday, particularly upbeat home sales, reinforced the view the economy was recovering from the weather-related problems and the Fed was still on track to raise rates.
"The GDP data was largely in line, slightly better than what the market expected," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.
The dollar was off 0.14 percent at $1.0984 against the euro, which was benefiting from hopes a deal may soon be reached between Greece and its creditors, according to Wizman.
Traders cited a warning from Japanese Finance Minister Taro Aso as a factor behind the dollar's move away from Thursday's high of 124.46 yen. That was a 12-1/2 year peak for the dollar which was last trading at 124.08, up 0.27 percent.
Aso told reporters in Germany that the yen's weakness has been "rough." But Japanese Economics Minister Akira Amari said on Friday the pace of yen declines could not necessarily be described as excessive.
The dollar rose against the Canadian dollar, which was stung by data showing the country's economy shrunk in the first quarter.