The dollar index .DXY , which tracks the greenback against six rival currencies, was down 0.12 percent to 93.53, after rising as high as 93.888 earlier in the session.
The market's main safe-haven, gold, hit a two-month high of 1278 an ounce.
But the yen added to an already-strong weekly rally of close to 1.5 percent, hitting its highest in nearly four months versus the dollar at 108.73 yen.
The Korean won also continued to skid, down 0.45 percent to 1,147.2, falling below its 200-day moving average for the first time in a month.
The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for U.S. inflation to reach the bank's two percent target, the latest warning price pressures remain muted. This week has been its biggest rise since June 2016.
Trump issued a new tweet-warning to Pyongyang on Friday: "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely". Some of Canada's biggest banks were also influential decliners, but closed with only moderate losses.
Australian shares were down 1.3%, set for a weekly loss of 0.6%.
Commodity-related stocks are among the worst performers against the backdrop of heightened political uncertainty after Trump further ratcheted up the rhetoric.
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Danish biotech company Novozymes has tumbled after cutting its growth outlook.
In economic news, German consumer inflation grew an annual 1.7% in July, slightly faster than the 1.6% increase registered in June, final data from Destatis showed.
Markets are now awaiting USA consumer price data for July, due later in the session. Economists had expected prices to rise by 0.2%. Core prices had also been expected to climb by 0.2%.
Minneapolis Fed President Neel Kashkari is scheduled to take part in a moderated audience Q&A session at the Independent Community Bankers of Minnesota Annual Convention in Bloomington, Minnesota, at 11:30 am ET.
The dollar weakened after news that USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.
"We would now be careful with a whiff of risk aversion in the air and, by extension, also stay away from shorts in the rates market", RBC's global macro strategist Peter Schaffrik said.
On the other hand, shares of Nordstrom (JWN) may see early strength after the department store operator reported second quarter results that beat estimates on both the top and bottom lines.