The dollar fell to two-week lows against the yen and dropped from seven-week highs versus the euro on Thursday on fears of an imminent trade war after President Donald Trump said the United States would impose tariffs on steel and aluminum.
The greenback also slid from six-week highs against a basket of six major currencies.
The imposition of tariffs marks Trump's first major step in backing his protectionist agenda during his presidential campaign. Any trade war emanating from those tariffs could have a negative impact on the economy, analysts said.
"There's definitely concern we're going to get into a trade war and protectionism leads to foreign companies being unhappy," said Andrew Frankel, co-president of Stuart Frankel & Co in New York.
Trump announced on Thursday he would impose tariffs of 25 percent on imported steel and 10 percent on aluminum, in a move the administration said would protect U.S. industry.
In reaction, Canadian Trade Minister Francois-Philippe Champagne said any U.S. tariff or quota imposed on Canada's steel industry would be "unacceptable" and would be felt in both Canada and the United States.
The Canadian dollar hit session lows versus the U.S. currency following Trump's tariff announcement.