The dollar rose on Friday after a four-day losing streak on Friday, while perceived safe-haven currencies such as the yen gained as investors grew cautious ahead of what is expected to be a contentious G7 meeting in Canada later in the session.
Despite Friday's gains, the dollar was on track for its largest weekly drop since late March. Next week's expected hike in U.S. interest rates by the Federal Reserve, a European Central Bank policy meeting and a Brexit bill vote all pose risks for currency traders and could inject more volatility in the market.
"Headline risk is elevated into the G7 leaders' summit as market participants focus on trade and President Trump," said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.
U.S. President Donald Trump lashed out at Canada and the European Union on Friday, setting the tone for a hostile Group of Seven (G7) summit and raising the specter of a trade war that has unnerved Washington's top allies as well as investors.
The dollar rose 0.18 percent against a basket of currencies to 93.56. But it was poised to notch its biggest weekly drop in 11 weeks.
Trade disputes between the United States and its major partners will be in the spotlight, with the Mexican peso and the leading losers.
The peso fell to its weakest level against the dollar in 16 months on Friday.
High yielding currencies were a sea of red with higher on the day. The dollar was last down 0.21 percent versus the yen at 109.46.
ECB bets
The dollar has come under pressure this week as the euro bounced back from 10-month lows thanks to an ebb in Italian political concerns and speculation that the ECB could signal intentions to start unwinding its massive bond purchasing program when it holds the policy meeting on June 14.
The euro fell 0.25 percent to $1.1768 after rising to a three-week high of $1.1840 overnight as investors took profits into this week's bounce. It was up more than 1 percent on the week and was set to post its biggest weekly gain since mid-February.
While expectations have grown that the ECB will signal its intention to wind down the quantitative easing program, ING strategists believe the Italian political situation and the potential of a breakout in trade tensions will stay its hand.