Against a basket of six key rival currencies, the dollar slipped 0.2 per cent to 96.314.
The index had risen three-quarters of a percent in the previous session after falling to a more than six-week low on Wednesday after the Federal Reserve said it had abandoned plans to raise interest rates this year.
European Union leaders on Thursday gave May two weeks’ reprieve, until April 12, before Britain could crash out of the bloc if lawmakers next week reject her Brexit plan for a third time.
If she wins the vote in parliament, May will have an extra two months, until May 22.
Sterling rose a quarter of a per cent to 1.3140 dollar.
It had retraced sharp losses overnight, when it touched as low as 1.3004 dollar.
“Whenever we get news of the can being kicked down the road, the market reacts positively,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
“Investors are probably shying away from exposure to the UK right now in terms of positioning – probably going back to benchmark exposures and wait-and-see mode,” he said.
The Bank of England kept interest rates steady on Thursday and said most businesses felt as ready as they could be for a no-deal Brexit.
Japan’s core consumer prices rose 0.7 per cent in February from a year earlier, slowing from the previous month’s pace, data showed on Friday.
Against the Japanese yen, the dollar was a shade lower at 110.78 yen, staying well away from the 111-level last breached before the Fed’s rate announcement.
Three in four Japanese companies expect U.S.-China trade frictions to last until at least late 2019, a sharp contrast to market hopes that presidents Donald Trump and Xi Jinping might soon strike a deal, a Reuters poll found.
A U.S. trade delegation headed by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will visit China on March 28 and March 29, which will be followed by a trip by Chinese Vice Premier Liu He to Washington in early April.
“It certainly feels like markets will need a few more days and sessions to interpret the recent change in Fed positioning,” said Nick Twidale, chief operating officer at Rakuten Securities Australia in Sydney.
“To absorb the further developments with regard to trade and geo-political factors, investors will be hoping for more smooth trading conditions in the weeks ahead,” he said in a note.
The yield on the benchmark U.S. 10-year Treasury note stood at 2.532 perc cent after having slipped to as low as 2.500 per cent on Thursday, its lowest since early January 2018.
Figures showing the number of Americans filing applications for unemployment benefits fell more than expected last week had helped lift the dollar overnight.
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