The Dollar rose on Friday as investors scaled back bets for another aggressive Federal Reserve interest rate cut this week and on optimism a $150 billion stimulus package would help support the US economy. However, concerns about an extended fall in US equities gave some support to the Japanese currency up against the Dollar. US stocks extended losses and safe-haven Treasury bond prices rose, reflecting considerable uncertainty about the near-term outlook.

The Fed's emergency 75bp rate cut last Tuesday, precipitated by sharp falls in global stocks, prompted investors to price in 50bp reduction from the US central bank at this week's scheduled policy meeting. Losses in European stock markets on Thursday and earlier on Friday were largely linked to fallout from a trader scandal at the French bank Socgen. Rate futures suggest a 76% chance of a 50bp reduction in the fed funds rate target to 3% at the Fed meeting Jan. 29-30.

The EurUsd dropped to a session low of 1.4661. It was last trading at 1.4611, down 0.62%. Some traders cited profit-taking ahead of the weekend. UsdJpy slid to an intraday low of 106.73, -0.41%, tracking the slide in equities. UsdChf traded up 0.91% to 1.0967, not far from intraday high 1.0990. EurGbp dropped 0.88% to 0.7403.

With the European Central Bank's interest rate at 4% and monetary authorities maintaining their hawkish inflation rhetoric, aggressive Fed easing would further undermine the Dollar's yield appeal against the Euro.

Weaker-than-expected consumer inflation data held the Canadian dollar down against the greenback as it backed expectations of a rate cut from the Bank of Canada. UsdCad was down 1.87% at 1.0045, off a session peak of 1.0257.

A heavy data calendar awaits investors this week, including the January non-farm payrolls, which could decide the direction of the recession debate.