The dollar consolidated overnight losses on Friday and is set for its biggest weekly drop in 10 months as the threat of a U.S. government shutdown and lower bond yields on the back of concerns of slowing economic growth weigh.
“I think the markets are focusing more now on U.S. economy-specific risk rather than global economy risks and that is weighing on the dollar,” said Thu Lan Nguyen, an FX strategist at Commerzbank in Frankfurt.
Against a basket of its rivals, the dollar was broadly steady at 96.247 but is set to fall 1.2 percent for the week, its biggest weekly drop since mid-February.
The dollar received little support from the bond markets, with yields on 10-year U.S. Treasury debt settling at 2.80 percent, well below a more than seven-year high of above 3.2 percent hit in November.
Some liquidation of long dollar positions, one of the most crowded trades in global markets, was also evident a day after the Federal Reserve raised policy rates and delivered an outlook that was less dovish than traders had anticipated.
The safe-haven Japanese yen benefited from the nervous sentiment, strengthening 0.2 percent against the dollar to 111.09 yen.
The euro was 0.22 percent higher at $1.1470, just below a 1-1/2-month peak of $1.1486 the previous day. It was headed for a 1.4 percent gain on the week.
The pound gained 0.3 percent to $1.2690.
