The US dollar edged lower against major currencies on Friday as risk appetite recovered across markets, after Federal Reserve officials helped calm jitters this week about accelerating US inflation.
The greenback, seen as a safe haven in times of market volatility, was down a third of a percent against a basket of currencies, retracing some of its earlier gains on Wednesday after data showed a surprise surge in consumer prices.
US consumer prices increased by the most in nearly 12 years in April on booming demand.
Federal Reserve officials have played down expectations of tighter policy, stressing price rises from the reopening of the economy should be temporary.
Global stocks also edged higher, snapping a three-day rout.
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"The foreign exchange market has continued to stabilize overnight after absorbing the shock of the much higher US CPI... helped by the rebound in global equity markets," analysts at MUFG said in a note.
A slew of more US data is due later on Friday, including retail sales and industrial production, likely to give further clues about the extent of the economic recovery.
The euro was among the gainers against the dollar on the day, up 0.4 per cent at $1.21265.
Ulrich Leuchtmann, head of FX and commodity research at Commerzbank, said in a note he believed US inflation fears had led to the single currency being undervalued.
"There is no rational argument to underpin why EUR-USD trades below the levels seen on Wednesday morning – considering the reaction of other market segments," he wrote.
The pound is on track to gain more than half a percent over the week, on bets of a strong economic recovery in Britain and expectations any Scottish independence referendum could be a way off.
In cryptocurrencies, Bitcoin was headed for its worst week since February - trading around $50,000 - after Tesla boss Elon Musk said this week he would stop accepting the token as payment due to environmental concerns.