The dollar index, which measures the currency against a basket of six rivals, was 0.2 percent higher, recovering after a week that included several weak data reports, including dismal U.S. retail sales. Major currencies remained range-bound as the market awaited developments in trade talks between Washington and Beijing.

The Labor Department said on Friday that import prices decreased 0.5 percent last month as petroleum product costs fell and a strong dollar curbed prices for motor vehicles and consumer goods, leading to the largest annual drop in nearly 2-1/2 years.

After rising 1.6 percent so far in February, the dollar fell broadly on Thursday when poor U.S. retail sales suggested a sharp slowdown in economic activity at the end of 2018.

"Calling the next move in the dollar is pretty tough right now. The start of the year saw investors move into undervalued risk assets, but right now the mood is shifting toward one of secular stagnation," said Chris Turner, head of foreign exchange strategy at ING.

The results of a meeting on Friday between U.S. Treasury Secretary Steve Mnuchin and Chinese President Xi Jinping is also in focus for foreign exchange investors.

Earlier in the week, markets cheered U.S. President Donald Trump's upbeat assessment of the talks, but a lack of progress since then has bred a risk-off mood causing declines in the Australian dollar, a proxy for China risk.

Any bad news out of the trade discussions on Friday could push the dollar back up, given investor demand for safe-haven assets during uncertain times, Turner said.

The euro extended its fall to a three-month low after Benoit Coeure, a member of the European Central Bank's executive board, said a new round of cheap multiyear loans to banks was possible. Coeure added that the euro zone's recent economic slowdown is more pronounced than earlier expected, suggesting the path of inflation will also be more shallow.

The single currency was headed for a second week of losses and was down 1.7 percent year to date on weaker-than-expected euro zone data.

Elsewhere, sterling was broadly flat at $1.28 after British Prime Minister Theresa May on Thursday suffered a largely symbolic defeat on her Brexit strategy.

Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Reporting by Kate Duguid in York and Tom Finn in London; Editing by Jeffrey Benkoe)

By Kate Duguid