The dollar slipped on Friday after a draft statement showed leaders of the Group of 20 rich and developing nations pledged to sustain emergency measures until the economic recovery becomes solid, encouraging speculators to sell the low-yielding greenback.
"The statement was taken as a sign that conditions for dollar carry trades will remain intact, sparking some dollar selling," said a forex trader at a big Japanese bank. The US currency rallied broadly earlier after the Federal Reserve and other major central banks the previous day jointly announced steps to scale back massive injections of the dollar.
Early dollar buying was further boosted by comments from Fed Board Governor Kevin Warsh that the US central bank may have to raise interest rates from near zero percent before the need to take action is obvious. Sterling slid further to a four-month low against the dollar as a break of major support levels triggered a wave of stop-loss sales.
The dollar index was down 0.2 percent at 76.719, after rising over 1 percent on Thursday. The euro edged up 0.2 percent to $1.4690 after falling as low as $1.4614 earlier in the day. The European currency hit a one-year peak of $1.4845 on Wednesday on trading platform EBS.
Traders said Asian central banks had been buyers around $1.4620, putting a floor above Monday's lows around $1.4610. Higher-yielding currencies such as the Australian and New Zeland dollars also recovered losses against the greenback after the draft G20 communique.
The Aussie rose 0.4 percent to $0.8691, crawling back towards a 13-month peak of $0.8790 reached earlier this week. Sterling was hammered after Bank of England chief Mervyn King said a weak currency was helping the domestic economy, which was taken as a green light for speculators to sell it.
The pound extended its slide on Friday, falling below major support at $1.60. It dropped as low as $1.5917, its lowest since early June, before edging back to $1.5989, down 0.4 percent on the day. The UK currency also sank against the euro, which rose more than 0.6 percent on the day to 91.93 pence, its highest since early April.
The dollar fell 0.8 percent against the yen to 90.57 yen as the Japanese currency rose broadly, helped partly by its sharp gains versus the pound. Some Japanese exporters sold dollars as the country's financial half-year ends on September 30, while Japanese institutional investors and overseas hedge funds took profits on a rally in cross/yen in the past few months before the quarter-end, traders said. Against the yen, the euro shed 0.6 percent to 133.02 yen.