The dollar was slightly down Friday against the euro, which fell below the US$1.28 mark before regaining strength as investors awaited the release of U.S. economic data focusing on industrial production.
The euro bought as little as $1.2778 before recovering to trade at $1.2846 in midmorning European trading, compared with $1.2827 in New York late Thursday. The British pound was at $1.8844, down from $1.8939.
The dollar was up against the Japanese yen, buying 108.23 yen, from 107.37 late Thursday.
In Washington, U.S. Treasury capital flow figures for February and industrial production for March were set to be released.
The capital flow numbers are an indicator of whether U.S. asset markets are attracting enough foreign interest to cover the U.S. trade deficit. Concerns about the massive U.S. trade deficit pressured the dollar sharply downward last fall.
The U.S. Commerce Department had reported Tuesday that the trade deficit hit an all-time high of $61 billion in February, a 4.3 percent increase over January that was far more than economists had expected.
Weekend meetings of the International Monetary Fund and World Bank as well as the Group Of Seven industrialized nations weren't expected to have much of an impact on foreign exchange rates.
The Group of Seven countries were expected to go on record again in urging China to stop linking its currency, the yuan, directly to the U.S. dollar. American manufacturers contend this practice has undervalued the yuan by as much as 40 percent, giving Chinese companies a tremendous competitive advantage against U.S. products.
They blame China's undervalued currency for contributing to America's record $162 billion trade deficit with China last year and the loss of 3 million U.S. manufacturing jobs since 2000.
At the G-7 meetings in Washington in October and London in February, China's top economic officials attended as invited guests to take part in the currency discussions. However, this time around, Chinese officials decided to take a pass. They maintain that China cannot drop its link to the U.S. dollar because too much currency volatility could disrupt the nation's fragile banking system.