The U.S. dollar gave up earlier gains after Federal Reserve Chairwoman Janet Yellen dropped a hint Friday that an interest rate hike is on the way later this month.
"We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect," Yellen said at a speech in Chicago, according to prepared remarks.
The dollar index rose briefly but ended up 0.68 percent lower at 101.52 after Yellen's comments. The dollar rose to a session high against the yen at 114.74 but then ended up about 0.3 percent lower at 114.03 yen.
The euro rose 0.58 percent against the dollar after a poll showed French far-right candidate Marine Le Pen's chances in the country's presidential election dimming.
While the French election news may be supportive for the euro at the margin, the political race has not necessarily been the main driver for the euro's recent weakness, Scotiabank's Osborne said.
"That's more about the shift in relative yields and monetary stance given the move in short-term rates in the U.S.," he said.
U.S. two-year Treasury yields hit their highest in more than 7-1/2 years on Thursday.
Rate hike expectations also weighed on the Australian and New Zealand dollars, both of which fell against the greenback. The kiwi dollar was down 0.64 percent, while the Aussie was down 0.12 percent.
"People were not expecting the Fed to move in March so last month they were putting on more (interest rate) carry trades in these currencies," said Bank of Montreal head of European FX strategist Stephen Gallo. "That is clearly coming off."
Mexico's peso strengthened to its strongest level since the U.S. presidential election in November, after U.S. Secretary of Commerce Wilbur Ross said a sensible trade deal with Mexico will help the battered currency.