The dollar fell against most G10 currencies after a consumer confidence reading came in above economists' expectations, extending the slide in long-dated Treasuries.
The yen is on track for its biggest gain in almost three weeks after Japanese officials discussed the currency's weakness during a meeting with U.S. counterparts.
The Bloomberg Dollar Spot Index dropped 0.3% on the day to 1,212.63, though it remains poised for a second straight weekly advance, which would be its longest winning streak since late June.
U.S. consumer confidence fell to a four-month low in September but still topped forecasts, and the 30-year Treasury yield rose as much as 6 basis points to 5.53%.
Brent crude futures extended losses to 2.24%, slipping below $105 a barrel, after people familiar with the matter said U.S. and Iranian negotiators are exploring a phased agreement that would include Iran reopening the Strait of Hormuz.
The dollar dropped 1.1% against the yen to 157.14 after Japanese Prime Minister Sanae Takaichi told U.S. President Donald Trump that the yen's undervaluation "is a problem."
"This is a strong statement from the prime minister and has had a very large impact on the foreign exchange market," said Dariusz Kowalczyk, head of Asia cross-asset strategy at BBVA.
"I think further intervention by the authorities is possible at this point, but I put the probability at only 30% right now. For the immediate future, testing the market's resolve on the exchange rate is far more likely," Kowalczyk said.
The euro rose 0.2% to 1.1399 but is still headed for a third consecutive weekly decline. Sterling gained 0.2% to 1.3249, though it remains down 1.1% for the week.
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