Traders flocked into the perceived safety of the dollar and yen as the pound swung wildly this week over Brexit. On Thursday, British Prime Minister Theresa May said she won the backing of her senior ministers for a draft divorce deal, but many in her government are unconvinced and on Friday her Brexit minister Dominic Raab, and other ministers, resigned.

"Heightened political uncertainty in the UK kept the pound on volatile ground," Western Union Business Solutions analysts wrote in a research note. "Sterling was spellbound, alternating between gains and losses, after Britain's Brexit minister resigned."

Raab's resignation left May battling for survival as well as trying to win over her Conservative Party to support the EU withdrawal agreement.

At 11:02 a.m. (1602 GMT), sterling was down 1.65 percent at $1.2768.

Against the euro, it was 1.71 lower at 88.57 pence.

Reports out of Italy that Prime Minister Giuseppe Conte was looking to work with the EU over his government's 2019 budget, which has been rejected by Brussels, to avert massive fines had earlier helped support Italian government bond markets and the euro.

The single currency held steady versus the greenback at $1.131, but it fell 0.19 percent to 128.235 yen.

"The dollar is benefiting from the sterling crash," said Manuel Oliveri, FX strategist at Credit Agricole.

An index that tracks the greenback against six major currencies was up 0.3 percent at 97.098. It touched a 16-month high of 97.693 on Monday.

The dollar was down 0.21 percent at 113.38 yen.

Analysts said the dollar's gains on the back of the sterling slump were contained after some cautious comments about the economic outlook from Federal Reserve chairman Jerome Powell overnight.

The Australian dollar rose 0.32 percent to $0.7259 on stronger-than-expected domestic jobs data. The New Zealand dollar was up 0.44 percent.