The dollar was weighed by news that the U.S. government may have to step in to salvage troubled mortgage lenders Fannie Mae and Freddie Mac with state ownership.

After doubts emerged this week about the capitalisation needs of the two government-sponsored bodies, the news that the government may intervene to return the two companies to public ownership made markets nervous.

“Traders may look to further limit any exposure to the dollar as we move into the weekend break,” particularly ahead of economic data later today, said James Hughes at CMC Markets.

The University of Michigan consumer optimism indicator is expected to erode slightly to 56.0 in July from the previous reading of 56.4, remaining near a record low.

The trade deficit is also expected to worsen, to $62.1 billion in May from $60.9 billion in the prior month, driven by higher crude oil costs.

Additionally, the dollar is being hurt by oil prices inching higher once again as well as geopolitical tensions resurfacing in the Middle East.

The euro and pound, meanwhile, are not expected to show much momentum today, as few fundamental drivers are scheduled and after recent economic data has highlighted the extent to which growth is slowing across Europe.

The possibility of a recession in the euro zone will keep the European Central Bank from raising rates any more this year, with most analysts expecting the next move to be a cut after several months of staying on hold.

In the UK, too, data has shown the economy may already be entering a recession — a view which has forced the Bank of England to keep interest rates unchanged on Thursday despite a flare-up in inflation.

London 1155 GMT London 0835 GMT

U.S. dollar

yen 106.71 down from 107.17

Swiss franc 1.0246 down from 1.0289

Euro

U.S. dollar 1.5819 up from 1.5773

pound 0.7988 up from 0.7982

Swiss franc 1.6208 down from 1.6229

yen 168.80 down from 169.04

Pound

U.S. dollar 1.9804 up from 1.9762

yen 211.32 down from 211.81

Swiss franc 2.0291 down from 2.0328

Australian dollar

U.S. dollar 0.9635 up from 0.9616

pound 0.4865 down from 0.4866

yen 102.75 down from 103.05

Source: http://www.afxnews.com

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