The USD currency recorded its biggest weekly drop in a year after President Donald Trump's threat to Greenland and the market atmosphere worried investors.
At 9.50 am, the US Dollar Index (DXY) was at 98.328 points, up 0.06% since it opened in early trading on Friday in the Asian session.
The changing geopolitical landscape weighed on market sentiment this week following US President Donald Trump's statement on US access to Greenland through a joint NATO agreement.
The development came as the withdrawal of tariff threats against Europe and the rejection of the possibility of taking the autonomous Danish territory by force.
In the currency market, the US dollar came under pressure as investor concerns about US assets increased at the beginning of the week, driven by escalating geopolitical tensions.
Market assessments indicate that while the Greenland agreement eased immediate risks related to tariffs and territorial conflicts, the fundamental issues of relations between the allies have not yet been resolved. This situation is seen as potentially undermining the US dollar's position as a global reserve currency.
Investors' focus on Friday will turn to the Bank of Japan (BOJ) decision, with the central bank widely expected to keep interest rates unchanged after raising its benchmark rate to a 30-year high last month.
Markets will be paying close attention to comments from BOJ Governor Kazuo Ueda to gauge the timing of the next rate hike and any signs of a more hawkish stance in an effort to support a weak yen.
The yen has been under pressure since Sanae Takaichi took over as Japanese Prime Minister in October, amid concerns about the country's fiscal position. The currency has fallen more than 4 percent, approaching levels that previously prompted verbal warnings and concerns about possible market intervention.
