LONDON - The U.S. dollar slipped on Friday and headed for its first weekly decline of June as traders dialled down bets on where interest rates might peak and brought forward the timing of rate cuts to counter a possible recession.

A significant shift this week has been the fall in oil and commodity prices, which has eased inflation fears and allowed equity markets to rebound. This has eroded the safe-haven bid that's been boosting the greenback against major currencies.

By 0920 GMT, the dollar index, which measures the greenback against six major currencies, was modestly lower at 104.20. It rose 0.2% on Thursday, mostly due to a decline in the euro after weak business activity data reduced bets for European Central Bank tightening.

The dollar, up 9% this year, has lost some of its shine since investors started betting the Fed could slow the rate-tightening pace following another 75 basis-point increase in July, and may start easing policy after March 2023.

Fed Governor Michelle Bowman said she supports 50 bps hikes for "the next few" meetings after July's.

However, Fed Chair Jerome Powell, in his second day of Congressional testimony on Thursday, stressed "unconditional" commitment to taming inflation, even amid risks to growth.

The rate hike repricing sent 10-year Treasury yields to two-week lows while the dollar index has lost 0.4% this week.

Analysts noted however that terminal rate repricing was happening across the developed world as recession fears grow.

"The repricing in the market.. has held the dollar back but an offsetting force is the risk of a global downturn. The Fed is pretty much on autopilot, until they take their foot off the brakes, dollar weakness will be limited," BMO Capital Markets strategist Stephen Gallo said.

"Rate hikes are being taken out of the euro and sterling markets too."

The yen, sensitive to changes in U.S. yields, was up 0.1% around 134.9 and was set to snap a three-week losing streak during which it tumbled to successive 24-year lows beyond 136.

"If U.S. Treasury yields have peaked so has dollar/yen. If you combine better Japanese GDP growth and a peak in U.S. yields it's a benign environment for yen strength," said Mizuho senior economist Colin Asher, who expects yen around 130 by year-end.

The euro ticked up 0.2%, after Thursday's 0.44% tumble which was triggered by weaker-than-expected PMI figures for June and Germany's move to trigger the "alarm stage" of its emergency gas plan

For the week though, the euro is up 0.5% against the dollar.

The greenback's slide boosted even commodity-focused currencies such as Australian dollar and Norwegian crown. The Aussie ticked up 0.14% to $0.6904, though it remained on track for a third straight weekly decline.

The Norwegian crown, fresh off Thursday's 50 bps rate hike, inched up 0.4%.

(Editing by Dhara Ranasinghe)