The Swiss franc in particular is on track for its biggest weekly rise in nearly four months, up 1.5 percent this week in thin year-end trading that has sapped appetite for risk.

While the dollar has generally held up well against its rivals in the last two weeks despite dwindling expectations of further interest rate increases from the Federal Reserve next year, Friday's session saw investors consolidating positions.

"This looks like a classic risk aversion trade in currency markets," said Thu Lan Nguyen, an FX strategist at Commerzbank in Frankfurt.

The yen gained 0.7 percent at 110.23 against the dollar while the Swiss franc strengthened by a similar margin.

The dollar index, a gauge of its value versus six major peers, extended losses and declined by around 0.3 percent to 96.22, after losing 0.5 percent overnight.

"The broad environment is a bit more tentative for risk taking and the dollar looks to be struggling thanks to volatile US stocks," said Lee Hardman, FX strategist at MUFG in London.

Weak economic data also weighed, with Japanese industrial output contracting in November and partially reversing gains registered in the previous month, indicating headwinds for the global economy.

Data also showed consumer confidence at its weakest in more than three years in the United States, as well as an unexpected drop in industrial profits in China - stark reminders for investors of the deteriorating global growth outlook. and