The Bloomberg Dollar Spot Index declined on Friday, paring back its first weekly advance in four weeks. As market risk appetite improved and equity markets climbed, the U.S. dollar weakened against most major currencies. The yen held steady ahead of a critical lower house election in Japan over the weekend.

The Bloomberg Dollar Spot Index fell 0.4%, leaving it with a 0.2% gain for the week.

The dollar's rise this week was primarily driven by technical factors, as the strong downward trend observed in late January stalled following the nomination of a new Federal Reserve Chair, according to Marc Chandler, Chief Market Strategist at Bannockburn Global.

U.S. Treasury yields climbed across the curve, with the 10-year yield rising 3 basis points to 4.21%, while equity markets advanced, pushing the S&P 500 up nearly 2%.

Rick Rieder of BlackRock indicated he would reduce exposure to U.S. investment-grade and high-yield bonds in favor of increasing holdings in emerging market debt.

Currencies sensitive to commodity price movements led gains as gold prices rose, and the rally in equities helped reverse a previous risk-off sentiment.

The Australian dollar rose 1.3% against the U.S. dollar to 0.7016.

The U.S. dollar fell 1.3% against the Norwegian krone to 9.6785, though it still posted a 0.3% weekly increase.

The New Zealand dollar gained 1.2% against the U.S. dollar to 0.6019.

The U.S. dollar was largely unchanged against the yen at 157.11, as investors assessed the political situation ahead of Japan's weekend election and a Bank of Japan board member signaled a more hawkish stance.

The euro rose 0.4% against the U.S. dollar to 1.182.

The British pound advanced 0.7% against the U.S. dollar to 1.3619.