The U.S. currency erased losses against a basket of major currencies.
TOKYO: The dollar firmed against its peers on Friday, supported as an improvement in investor risk appetite lifted equities and pushed U.S. yields significantly higher.
The dollar index against a basket of six major currencies was a shade higher at 89.758. It rose 0.2 percent the previous day, ending a four-day losing streak.
The index managed to bounce as Treasury yields spiked, with that of the 10-year surging 5 basis points overnight to its highest since late March.
Yields rose as Wall Street gained on Thursday in anticipation of strong corporate earnings, and as geopolitical worries eased on U.S. President Donald Trump's suggestion that a military strike on Syria may not be imminent.
"The dollar had not shown a strong correlation with U.S. yields recently. But the correlation returned somewhat, with currencies taking notice of such a spike in yields," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
"Risk aversion in equities will need to keep receding for the dollar to remain supported. There is no change to the equation of 'Trump risk' dictating market direction."
The dollar was down 0.1 percent at 107.245 yen after rising more than 0.5 percent overnight. The greenback has gained about 0.3 percent versus the yen this week.
The euro was little changed at $1.2392 after losing 0.3 percent the previous day, when it ended a four-day winning run.
The common currency has risen 0.4 percent this week, supported by comments from European Central bank officials that reinforced expectations towards monetary policy normalisation.
The Australian dollar was steady at $0.7757 and the New Zealand dollar was a shade higher at $0.7379. - Reuters
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