"We have seen go offered on the news and any surprise improvement/reset in U.S.-China relations could see move further away from the key 6.50 threshold," said ING strategists in a morning note to clients.
"Such a move is typically positive for pro-cyclical FX and slightly negative for the dollar - hence our down arrow in the dollar today."
The Australian dollar gained 0.4% to $0.7394, though heading for a 0.7% slide this week. Also boosted by the yuan move was the New Zealand dollar, which gained half a percent to $0.7144. Both currencies tend to benefit when risk sentiment is positive.
The Japanese yen lost 0.2% against the dollar to 109.93 yen while still meandering in the middle of its range of the past two months.
Relations between the United States and China have been testy since Xi and Biden's first call in February. The two sides have lashed out at each other almost constantly, often with vitriolic public attacks, sanctions on officials and accusations of not upholding international obligations.
The dollar index, which measures the greenback against six major peers, was down less than 0.1% on the day at 92.461, although still on course for a 0.4% weekly rise.
The greenback has rebounded from a payrolls-induced sell-off last week, as a number of Federal Reserve officials have come out to suggest a taper is still likely this year.
"Risk aversion dominated at the beginning of the week favouring a rebound in the USD index but the move has faded into the weekend," said Roberto Cobo Garcia, head of G10 FX strategy at BBVA.
"Growth concerns with the Fed acknowledging in its Beige Book on Wednesday that 'economic growth downshifted slightly to a moderate pace in early July through August,' may have weighed on the greenback."
Fed Governor Michelle Bowman said on Thursday that the weak August labour report would not throw the U.S. central bank off course.
Last Friday, the dollar index sank to the lowest since Aug. 3 after data showed the U.S. economy created the fewest jobs for seven months, reducing the odds of an imminent reduction of the Fed's asset-purchase programme.
Data on Thursday showed that the number of Americans filing new claims for jobless benefits fell last week to the lowest level in nearly 18 months, offering more evidence that job growth was being hindered by labour shortages rather than cooling demand for workers.
The euro was largely unchanged at $1.1831 on Friday, on track for a 0.35% decline this week.
The single currency got some small measure of support overnight, after the European Central Bank said it would trim emergency bond purchases over the coming quarter, as widely expected.
Current valuations and contained optimism about the cycle could help to keep a lid on global market sentiment, although the maintenance of the ultra-lax monetary context should also prevent any major shock in global markets, Garcia said.
"In this regard, it appears clear that the Fed and the ECB will maintain a very cautious approach when starting to reduce stimulus measures in the coming months. Thus, USD ranges against FX majors should persist in the short term baring any significant surprise from the Fed or the evolution of the pandemic."
(Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland in Tokyo; Editing by Catherine Evans, William Maclean) ((Ritvik.Carvalho@thomsonreuters.com; +44 2075429406; Reuters Messaging: email@example.com; Twitter @ritvikcarvalho))