The U.S. dollar edged up against most other major currencies Friday on data pointing to sluggish overseas economic growth, while the Australian dollar sagged to a six-year low after a Chinese manufacturing gauge fell to its weakest in 15 months.
Recent U.S. economic figures have supported the notion that the Federal Reserve sees the economy as strong enough for it to end its near-zero interest rate policy as early as September, an action that dollar bulls have betting on since last year.
"Worries about global growth have been rekindled. That has sparked a play into the dollar," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The flash Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) dropped to 48.2, the lowest since April last year, while Markit's euro zone PMI gauge fell from a four-year high to 53.7 in early July.
In late U.S. trading, the dollar index was up 0.2 percent at 97.274, reducing its weekly decline to 0.6 percent.
The greenback retreated from its earlier highs as U.S. stock prices turned lower for a fourth session.
Fed policymakers may provide clues on a rate "lift-off" in a statement after they meet next week.
The U.S. central bank on Friday released its staff's projection which showed they expected a quarter-point increase in U.S. rates by year-end.
"Next week's meeting could be a signal meeting," said Mazen Issa, senior currency strategist at TD Securities in New York.
Some analysts said there were adequate risks to cause the Fed to not raise rates this year, including turmoil in the Chinese stock market, and a renewed drop in oil and other commodity prices.
Friday's news of a surprise 6.8 percent drop in new-home sales in June was a reminder that the U.S. economy, while faring better than many others, was far from robust.
Among other major currencies, the Aussie dollar, often used as a liquid proxy for China trades, fell more than 1 percent to $0.7280, a six-year low.
Other currencies linked to global commodities prices also were under pressure because of the weak Chinese PMI data. The New Zealand dollar was down 0.6 percent at $0.6568.
Worries about Chinese demand sent Brent crude prices in London to near a four-month low at $54.30 a barrel and copper prices to six-year low of $5,191.50 a tonne.