The dollar index against a basket of six rivals was largely unchanged at 97.029, and on track for a half-percent gain this week. The index had touched an 11-week low of 96.459 last Friday.
The Federal Open Market Committee's (FOMC) two-day policy meeting is set to begin on Tuesday. With trade tensions rising, US growth slowing and hiring in May declining, markets have priced in at least two rate cuts by the end of 2019.
There was only a 13.4pc expectation on Thursday that US interest rates will be at current levels in July of this year, compared to 74.1pc a month ago, according to the CME Group's FedWatch tool.
"Ahead of the FOMC meeting, people are expecting dovish comments from the Fed, which is weighing on the dollar in general," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
"However, other currencies like euro and sterling are weak and their weakness is helping the strength of the dollar," he said.
Investors' attention on Friday will also be on US retail sales data due later in the global day for insights into the state of domestic demand in the world's biggest economy.
Market participants were also keeping a close eye on geopolitical issues including the months-long Sino-US trade conflict and US-Iran tensions following Thursday's attacks on tankers in the Gulf of Oman. Washington quickly blamed Iran for the attacks, but Tehran denied it was responsible.
Geopolitical risks have risen to the fore quite strongly, said Bart Wakabayashi, Tokyo branch manager at State Street Bank.
"The anticipation was for a relatively quick, undisruptive resolution to the trade situation with China. Obviously, that hasn't happened," said Wakabayashi.
The greenback dipped 0.1pc to 108.30 yen.
The Japanese currency showed little reaction to the latest round of trade negotiations between Tokyo and Washington on Thursday.
Japan and the United States deepened their understanding over each other's position on trade and will continue discussions, Japan's economy minister Toshimitsu Motegi said after meeting with US Trade Representative Robert Lighthizer.
Motegi said the two would probably meet again ahead of the G20 summit meeting in Osaka, Japan late this month.
The Australian dollar slipped as investors bet that aggressive rate cuts would be needed to support the economy in the wake of soft domestic data and the fallout from the US-China trade standoff globally.
"The perception of an Aussie rate cut is gaining steam," said Wakabayashi.
The Aussie was last down 0.3pc at $0.6896, and on course for a loss of about 1.5pc for the week.
Elsewhere, the euro edged up 0.02pc to $1.1279, holding up after falling during the past two sessions, though it was still set for a weekly loss of about 0.5pc.
Oil fell on Friday after sharp gains in the previous session when prices were boosted following the attacks on two tankers near Iran and the Strait of Hormuz, a key passage for seaborne oil cargoes.
Mizuho's Yamamoto said rising oil prices could create a drag on the dollar, adding that higher crude prices were not necessarily bad for the global economy.