• Earlier in the session, the dollar hit a six-week high after a set of solid U.S. economic data stoked expectations of four rate hikes by the Fed.
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 dollar index was last down 0.3 percent at 90.31 .DXY, peeled away from a high of 90.932 - its strongest since Jan. 19
• The euro, meanwhile, earlier hit a seven-week low on expectations that euro zone interest rates could stay at record lows throughout 2018.Data showing the currency bloc's manufacturing boom slowed last month helped send the euro as low as $1.2153 EUR=, its weakest since Jan.12. But the euro has recovered to trade up 0.5 percent at $1.2254.
• Euro zone economic momentum has peaked, according to a majority of economists in a Reuters poll who also said the European Central Bank will drop its easing bias on stimulus by or at the June meeting.
• The greenback was 0.1 percent lower at 106.170 yen JPY=, having slid for the past two sessions against the Japanese currency, which tends to gain in times of risk aversion and equity market weakness. The dollar fell to as low as 106.080 yen, its weakest since Feb. 16.
• 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.
• U.S. President Donald Trump’s decision to impose import tariffs on steel violates the rules of the World Trade Organization, the German Steel Association said on Thursday.
“Now the EU must resolutely proceed against this with the instruments the WTO provides,” Kerkhoff added.
• China will likely enact its own duties that would hurt U.S. exporters, now that President Donald Trump has announced tariffs on steel and aluminum imports, analysts said.
• Japan's trade minister responded to the news on Friday, saying that Japanese steel exports were not a threat to U.S. national security, Reuters reported.
• The tariff news overshadowed the Senate testimony of Federal Reserve Chairman Jerome Powell and comments from New York Fed President William Dudley on interest rates.
• In a question and answer session, Powell told the Senate Banking Committee on Thursday there was no evidence the U.S. economy is overheating, and labor markets may still have room to improve.
"We don't see any strong evidence yet of a decisive move up in wages. We see wages by a couple of measures trending up a little bit, but most of them continuing to grow at two and a half percent," he said. "Nothing is suggesting to me that wage inflation is at a point of accelerating. I would expect that some continued strengthening in the labor market can take place without causing inflation."
Powell added that he expects to see wage inflation soon.
• Some analysts said Powell retreated slightly from the hawkish comments made on Tuesday, probably recognizing the impact he made on stocks and U.S. yields earlier. Overall, though, the bottom line is that investors still believe that at the minimum, the Fed would raise interest rates three times this year.
• Influential Fed policymaker Dudley, meanwhile, seemed comfortable with four rate hikes in 2018, but said those increases would occur at a gradual pace.
• The U.S. Senate will vote on a bill next week to ease bank rules, bringing Congress a step closer to passing the first rewrite of the Dodd-Frank reform law enacted after the 2007-2009 global financial crisis.
• British Prime Minister Theresa May will set out her vision on Friday for a Brexit deal deeper and wider than any “free trade agreement anywhere in the world”, telling the European Union it is in their “shared interest”.
• Oil slumped more than 1 percent on Thursday, touching two-week lows under pressure from a retreating stock market and worries about surging U.S. crude output.
Brent, the global benchmark, settled at $63.83 a barrel, down 90 cents, or 1.4 percent. U.S. crude settled down 65 cents, or 1.1 percent, at $60.99a barrel, after touching a low of $60.18. The session lows for both benchmarks were the lowest in two weeks.
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