The greenback was down about 0.8 percent on the week against the safe haven yen, which was boosted earlier as a political scandal engulfed Japanese Prime Minister Shinzo Abe, casting doubts on the sustainability of his economic stimulus policies.
“The best explanation for the impact the ongoing personnel changes taking place in the White House is that the dollar stands to weaken as it gets easier for President Trump to pursue protectionist policies,” said Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo.
The yen, which tends to gain in times of risk aversion, also advanced against other currencies in the wake of the latest shake-up in the White House.
The euro was down 0.35 percent at 130.410 yen, the Australian dollar slipped 0.2 percent to 82.56 yen and the New Zealand dollar lost 0.8 percent to 76.76 yen.
The New Zealand dollar’s losses against the yen in turn dragged it down versus the U.S. dollar, with the kiwi shedding 0.4 percent to $0.7245.
The dollar managed to hold gains against a basket of peers, as recent concerns about the currency arising from trade tensions eased slightly and next week’s Federal Reserve policy meeting came into focus.
The dollar index versus a group of six major currencies was little changed at 90.081 after climbing 0.5 percent the previous day.
Prior to the overnight bounce, the index had fallen for three straight sessions as fears of a global trade war grew amid signs of rising U.S. protectionism.
“U.S. protectionism is a key factor, but it is also a theme with a long timeframe,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
“The market perhaps reacted excessively and the dollar was oversold, and now we are seeing those moves being balanced out as participants turn their focus on other events.”
The two-day Federal Open Market Committee meeting begins on March 19 at which the U.S. central bank is expected to raise interest rates for the first time this year.
The euro was steady at $1.2309 after declining 0.5 percent overnight. The common currency was little changed on the week, failing to make much headway against its struggling U.S. peer as the European Central Bank has stressed that its exit from easy monetary policy would be very slow.
The Canadian dollar retreated to an eight-month low after soft housing data reinforced views that the Bank of Canada could slow down the pace of its interest rate hikes.
The loonie also came under pressure after President Trump’s comments on commerce with Canada renewed trade concerns.
The Canadian dollar was little traded at C$1.3058 per dollar after reaching C$1.3072, its weakest since late June 2017.
Reporting by Shinichi Saoshiro; Editing by Sam Holmes
© Reuters News 2018