Fed Chairman Jerome Powell is expected to address the Jackson Hole symposium of central bankers at 1400 GMT, and traders will be keen to see how closely he allies himself with the hawkish camp.
Currency markets have in recent months been driven by global central banks' shift to more accommodative policy settings as economic demand slows and trade disputes intensify.
Expectations that the Fed will cut rates at its next meeting in September are still very high, according to interest rate futures, but the currency market is likely to react if the tone of Powell's comments does not match these dovish expectations, analysts said.
"I would expect him to stress that the U.S. economy is strong enough that...just a rate cut or two, taken out as 'insurance', will be enough to keep the recovery on track," said Marshall Gittler, chief strategist at ACLS Global.
"That's probably more hawkish than what the market is expecting and could be positive for the dollar."
The euro was down 0.1% at $1.1067 after falling to a three-week low of $1.1061 earlier. The index which tracks the dollar against six major currencies was up by 0.2% at 98.35.
The euro attempted to stage a relief rally the day before following the stronger-than-expected euro zone purchasing managers' surveys for August, but the gains proved short-lived.
The PMIs will keep "pressure on the European Central Bank to deliver further stimulus to support growth" in the euro area because "surveys remain consistent with weak growth continuing in the third quarter," said Lee Hardman, currency analyst at MUFG.
Views that rates may not go as low as previously expected also bolstered the New Zealand dollar after its central bank chief said he was "pleased" with where interest rates were.
Reserve Bank of New Zealand Governor Adrian Orr told Bloomberg TV he could afford to pause on monetary policy after 50-basis-point cut this month.
The New Zealand dollar jumped from a three and-a-half-year low of $0.6362 reached Thursday, trading up 0.4% at $0.6387 .
China's offshore yuan stabilized at 7.0920 after dropping to an 11-day low of 7.1072 overnight as the People's Bank of China lowered its official yuan midpoint to an 11-year low. Still, the move was limited given that the set rate was nowhere near the lows traders were expecting.
The pound gave back some of the gains it made on Thursday on the back of German Chancellor Angela Merkel giving Britain 30 days to come up with a Brexit plan, dropping 0.4% to $1.2208 . Against the euro, it fell 0.3% at 90.66 pence .