The dollar improved versus most peers with the exception of the yen, chalking up a second week of gains following a mildly hawkish view from Federal Reserve Chair Janet Yellen and surprising strong U.S. data on retail sales and consumer prices.
"We are trading in this political policy vacuum," Mazen Issa, senior FX strategist at TD Securities in New York, said of the dollar. "We are going to see things whipsaw around."
Weaker stock prices around the globe, together with a three-day U.S. holiday weekend, further fed appetite for the yen, bonds and other less risky assets.
The yen was up 0.3 percent against the dollar at 112.87 yen <JPY=> and was 0.9 percent higher versus the euro at 119.78 yen <EURJPY=>.
News the French left could unite behind one candidate in presidential elections, possibly knocking centrist and right-leaning nominees out of the race in the first round, raised a new scenario for a second-round runoff. This possible alliance could increase the chances of anti-EU, anti-immigrant Marine Le Pen winning the presidency.
In the wake of this political development, the euro fell 0.6 percent against the dollar at $1.0612 <EUR=>, holding above a five-week low of $1.0520 struck on Wednesday.
The euro's weakness helped stabilize the dollar as traders had pared bullish bets on the greenback earlier this week on reduced expectations the Federal Reserve will raise interest rates in March.
They concluded Yellen did not offer enough conviction of a March rate increase at her two-day testimony before Congress where she raised the possibility the central bank may raise rates more than twice in 2017.
A combative presidential news conference on Thursday following the resignation of National Security Adviser Michael Flynn this week raised doubts how effective the Trump administration will be in pushing through its economic agenda, with a goal to pump up the U.S. economy.
"For dollar bulls, this week has been frustrating," said Paresh Upadhyaya, director of currency strategy at Pioneer Investments in Boston. "We will likely remain rangebound next week."
The dollar index <.DXY> was up 0.44 percent at 100.89, reversing Thursday's 0.7 percent drop that was its steepest one-day loss in over two weeks. It eked out a weekly gain of 0.1 percent.
By Richard Leong