The dollar declined against a basket of major currencies on Friday, settling near a one-month low, as the threat of a looming trade war between the U.S. and China intensified.
President Donald Trump signed a memorandum that would implement tariffs on up to $60 billion in imports from China on Thursday.
The tariffs largely focus on technology sector goods and were intended to penalize China for, according to the Trump administration, stealing intellectual property.
In response, China on Friday proposed a list of 128 U.S. products as potential retaliation targets, according to a government statement.
Adding to risk-averse sentiment, Trump named John Bolton as his National Security Adviser late Thursday. Bolton is known for calls to use military force against both North Korea and Iran.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, ended down 0.4% at 89.10 by close of trade. It fell to its lowest since Feb. 19 at 88.98 at one point.
For the week, the index lost roughly 1.3%, its worst weekly performance in over a month.
The dollar was already on the back foot a day earlier after the Federal Reserve gave guidance on the pace of interest rate rises that was less aggressive than some investors had expected.
The yen, often viewed as a safe-haven currency in times of market turbulence and economic uncertainty, rose to a 16-month high against the dollar. The greenback was last down 0.5% at 104.74.
On the week, the yen rallied 1.1% against the buck.
The dollar also slipped 0.2% against the Swiss franc, another currency bought in times of market uncertainty.
Meanwhile, the British pound inched higher after Bank of England rate-setter Gertjan Vlieghe said that interest rates will probably need to rise once or twice a year over the next few years, comments that are likely to help cement investors' expectations of a BoE rate hike in May.
The euro was also a shade higher against the dollar, with EUR/USD gaining 0.4% to 1.2352.
In the week ahead, rhetoric rather than economics could be the main driver of sentiment, as investors watch further developments amid a brewing trade war between the U.S. and China.
On the data front, the final reading of fourth-quarter U.S. growth will be the highlight of the holiday-shortened week. Markets stateside will remain closed on Friday for Good Friday.
Staying in the U.S., a number of Federal Reserve policymakers are due to make public appearances that may offer insight into the likelihood of higher interest rates in the months ahead.
A final reading on British fourth-quarter growth data and monthly inflation data from Germany will also be in focus.
Monday, March 26
Deutsche Bundesbank President Jens Weidmann is due to deliver a speech titled "New Momentum for Europe" at the central bank of Austria, in Vienna.
Later in the day, New York Fed boss William Dudley, Cleveland Fed President Loretta Mester and Fed Governor Randal Quarles will deliver remarks.
Tuesday, March 27
Spain will release preliminary data on consumer price inflation.
The U.S. Conference Board is to release data on consumer confidence.
Later on, Atlanta Fed boss Raphael Bostic is set to deliver comments at the Hope Global Forums Annual Meeting, in Atlanta.
Wednesday, March 28
The U.S. is to produce final data on fourth-quarter economic growth, followed by a report on pending home sales.
Thursday, March 29
Germany is to release preliminary inflation data.
The UK is to publish a final reading on British growth data for the fourth quarter.
In the U.S., weekly data on initial jobless claims and reports on personal income and spending, which includes the personal consumption expenditures inflation data, the Fed's preferred metric for inflation, are on the agenda.
Canada is to release data on gross domestic product.
Friday, March 30
Global financial markets will stay closed for Good Friday.