Most currencies fell against the greenback after the United States' fourth quarter gross domestic product data topped expectations on Thursday. The global dollar index, which hit a low of 95.824 on Thursday, climbed to 96.299 in early Friday Asia trade.

The Chinese currency was also pinched by mixed U.S. signals on the trade war. U.S. President Donald Trump threatened on Thursday to walk away from a deal, while his economic advisor,

Larry Kudlow, hailed "fantastic" progress in the negotiations.

But Kudlow added that the United States is trying to get China to report any intervention in the foreign exchange market as part of a trade deal.

A Shanghai-based trader with a foreign bank, noting that the yuan "is still in focus" at the trade talks, said "there is no agreement on this yet, so there is still risk."

Another Shanghai trader agreed that renewed uncertainty about the trade dispute is making investors more cautious on the yuan.

Prior to Friday's market opening, the People's Bank of China set the yuan's midpoint rate at 6.6957, weaker than the previous fix of 6.6901. Spot yuan were changing hands at 6.6986 at midday, 51 pips weaker than the previous late session close and 0.04 percent softer than the midpoint.

Despite the slip, the yuan was up 0.26 percent for the week, thanks to rallying early on after Trump extended the tariff truce with China that had been scheduled to end on March 1.

Over time, the yuan should find fresh support in inflows generated from MSCI's decision on Thursday to quadruple Chinese stocks' weighting in its global benchmarks, said Carie Li, an economist at OCBC Wing Hang Bank in Hong Kong.

A private survey on Friday showed that China's factory activity contracted for a third straight month in Friday, though the index reading was higher than in January.

"The data is too mixed for people to have strong views in either direction," said Li.

The offshore yuan was trading 0.01 percent weaker than the onshore spot at 6.6995 per dollar.