- Fed chair Powell's speech due at 1400GMT
- U.S.-China tariff talks end with little progress
- Treasurer Morrison to become Australia's next prime minister
- Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
The dollar fell on Friday ahead of a speech by the Federal Reserve's chairman which investors hope will provide an indication of the central bank's plans for monetary tightening and reaction to recent criticism by U.S. President Donald Trump.
The greenback rallied on Thursday, boosted by a new round of tariffs in the escalating U.S.-China trade conflict and the Federal Reserve's latest policy meeting minutes which signalled a September interest rate rise.
But the currency wilted on Friday and was headed for its biggest weekly decline since March.
Analysts said growing U.S. political uncertainty, reinforced by the criminal convictions of two of Trump's ex-advisors this week, was keeping the dollar under pressure, despite the United States embarking on greater monetary tightening than elsewhere.
"In the current state of the U.S. political system, that is dominated by doubts in the system of checks and balances, remnants of U.S. dollar negativity remain," said Commerzbank analyst Ulrich Leuchtmann.
The dollar weakened on Monday after Trump said he was "not thrilled" with Fed Chairman Jerome Powell's rate hikes and that the U.S. central bank should do more to help him to boost the economy.
American presidents rarely criticize the Fed, whose independence is considered important for economic stability.
Investors are focusing on a speech by Powell to be held later on Friday at an annual meeting of central bankers in Jackson Hole, Wyoming.
"I think Powell may imply that, regardless of political pressure, the Fed may continue with rate hikes as long as the U.S. economy keeps expanding," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
"If the market can confirm that, then I think the dollar's strength will continue."
The dollar index .DXY , which measures the greenback's performance against six major currencies, was down 0.2 percent, trading around 95.5.
On Thursday, the dollar gained nearly 0.7 percent against the Japanese yen after the Fed's minutes showed officials discussed raising rates soon.
U.S. and Chinese officials ended two days of trade talks on Thursday without any major breakthroughs.
The talks between the two nations ended as their trade war escalated on Thursday after a new round of U.S. tariffs kicked in on $16 billion worth of imports from China, followed immediately by reciprocal tariffs from Beijing.
As a safe haven currency, the dollar has benefited from fears of international trade turmoil in recent months.
As the dollar fell on Friday the euro EUR=EBS edged up 0.2 percent higher to $1.1563, recouping some losses after shedding more than half a percent during the previous session.
The single currency weakened on Thursday after Italian deputy prime minister Luigi Di Maio threatened his party would vote to suspend funding to the European Union next year unless other EU countries agreed to take in migrants.
In quiet markets, the largest mover among the major currencies was the Australian dollar AUD=D3 which gained half a percent on Friday, after the ruling Liberal party voted in a new leader.
The Aussie dollar tumbled 1.4 percent on Thursday to become the worst performing G10 currency, after hitting its lowest since January 2017 of A$0.7202 last week, as the country was gripped by political uncertainty.
