The dollar index fell 0.03% as soft US economic data offset earlier gains, while gold and silver prices climbed to one-week highs on short covering and easing inflation expectations.
The dollar index fell from a 7-week high on weaker-than-expected US manufacturing production and leading indicators.
Gold settled higher as a weaker dollar and lower crude oil prices prompted short covering in precious metals.
WTI crude oil fell 1% on Friday, easing inflation expectations and potentially supporting looser monetary policy.
EUR/USD recovered from a 7-week low on short covering, stronger German PPI, and upbeat ECB Lagarde comments.
USD/JPY rose as the yen tumbled to a 2-week low despite the BOJ hike, with weak Japan CPI and BOJ dissents undercutting the yen.
Silver closed up 1.59% on short covering and signs of stronger industrial metals demand in Europe.
Higher T-note yields supported the dollar and pressured bond prices as markets priced in Fed rate hike odds.
The US dollar index retreated from a seven-week peak on Friday following weaker-than-expected manufacturing production and leading indicators. Conversely, precious metals rallied on short covering, while the euro gained momentum after upbeat commentary from ECB President Christine Lagarde.
The yen fell to a two-week low because two BOJ members dissented against the rate hike, signaling internal opposition to tighter policy, while weak national CPI data further undercut the currency.
Precious metals are benefiting from short covering as the dollar index retreats and falling crude oil prices ease global inflation expectations, potentially leading to less aggressive central bank tightening.