The Dollar fell broadly on Friday, hitting a three-week low against the Euro, amid mounting fears of a US recession and more credit-related losses. But a CNBC television report that a bailout for bond insurer Ambac Financial Group was imminent saw US stocks stage a late rally, helping the Dollar fight back from earlier troughs against the Yen.

The Dollar came under pressure as Thursday's contraction in the Philadelphia Federal Reserve Bank's Mid-Atlantic business activity index stoked recession fears, in contrast to the euro zone's surprising growth in the service sector reported on Friday.

EurUsd was up 0.09% at 1.4827, after racing to a three-week peak of 1.4863 on the back of the better-than-expected euro zone services sector data. It rose to 52.3 in February from 50.6 the previous month, a survey showed on Friday. The data dampened expectations of near-term rate cuts from the European Central Bank.

UsdJpy traded down 0.25% at 107.16, after sliding to a session low 106.73. UsdChf dropped 0.46 to 1.0852.

A late rally on the US stock market caused the Euro to erase earlier losses versus the Yen. EurJpy last traded -0.14% at 158.93 after touching an intraday low of 158.16.

Analysts warned the Dollar would remain vulnerable this week, with key Housing and Confidence reports due for release. They said the data would most likely confirm that the world's largest economy was sharply slowing down and back expectations of another 50bp reduction in the fed funds rate target next month. Rate futures markets are fully pricing in a half percentage point cut at the Federal Reserve's next meeting in March to 2.50 percent and factor in a small chance of a bigger 75bp reduction. That would add to an unusually aggressive 125bp cuts in January, as the Fed tries to stave off a US recession.

The Canadian dollar weakened after a domestic retail sales report missed expectations and supported the case for more rate cuts from the Bank of Canada. On Friday, UsdCad was up 0.14% at 1.0130.