Traders' optimism could also be seen in the Australian dollar, a proxy for Chinese economic prospects, which was 0.14% higher, at $0.700. But there was a cautious tone to the investor optimism and moves across currencies were muted.

Against a basket of six rival currencies, the dollar was 0.04% weaker at 97.331. Against the yen the dollar was last up 0.13% at 109.89.

"Risk has actually traded remarkably resiliently," said Alan Ruskin, global head of currency strategy at Deutsche Bank. Earlier this week, there were "some fairly sizeable risk-off moves, particularly in dollar/yen, (but) there has been no real follow-through today."

Although U.S. President Donald Trump on Friday said he was in no hurry to sign a trade deal with China, negotiators reported progress in the discussions as they wrapped up a second day of talks.

"They were constructive discussions," Treasury Secretary Steve Mnuchin told reporters as he left U.S. Trade Representative Robert Lighthizer's offices near midday. Chinese Vice Premier Liu He, his country's lead negotiator, told reporters at his hotel in Washington that the talks had gone "fairly well," Bloomberg reported.

Deutsche Bank's Ruskin said, "There's a sense that talks will continue. As to whether there will eventually be some kind of deal, Yes, but there will be a lot of noise in the interim."

Trump's tariff increase to 25% from 10% on $200 billion of Chinese goods kicked in on Friday, and Beijing has said it will strike back.

The decision to jack up U.S. tariffs on goods from China fueled bets on Friday that the Federal Reserve will cut interest rates later this year.

Also on Friday, the Labor Department reported that U.S. consumer prices rose in April but underlying inflation remained muted, suggesting the Fed could keep interest rates unchanged for a while.

Elsewhere, the Canadian dollar was higher after employment data showed the country added a record 106,500 jobs in April, which far outstripped analyst expectations. The loonie rallied the most since March, last 0.43% stronger at $1.342.

"We're probably a bit suspicious of how good that is, but at least for now that has helped make the Canadian dollar an outperformer among currencies," said Karl Schamotta, director of FX strategy and structured products at Cambridge Global Payments.

(Reporting by Kate Duguid in New York; Additional reporting by Saikat Chatterjee; Editing by Leslie Adler)

By Kate Duguid