The euro was edging higher on Friday, but concerns about a potential slowdown of the economy kept it in a tight range, while the dollar weakened as investors priced in the expected monetary tightening from the Federal Reserve.

"The combination of lingering Russia-related risks, high energy prices and Fed-ECB policy divergence still points to a weaker, rather than stronger, EUR/USD," ING analysts said.

"EUR-USD remains quite stuck at around 1.10, with better-than-expected PMI surveys across the eurozone for March not sufficient to induce buying interest," Unicredit analysts said in a research note.

German business morale deteriorated in March due to worsening supply chain issues resulting from high petrol prices and driver shortages, a survey showed on Friday.

The single currency rose 0.1% to $1.1016

Derek Halpenny, head of global research markets at MUFG, said in a note to clients that some renewed optimism over the prospect of the end of the conflict in Ukraine "helped improve financial market conditions and weaken the U.S. dollar."

President Volodymyr Zelensky said that Ukrainians "need to achieve peace" and halt Russian bombardment.

The U.S. dollar index, which measures the greenback against six peers, edged 0.1% lower to 98.631

BofA analysts underlined markets priced in next moves from the Fed even before it started and a lot more rapidly than during the previous tightening cycle between 2015 and 2018.

Money markets are betting on 190 bps of Fed rate hikes by year-end, including an 80% chance of a 50 bps in May. [IRPR]

Japan's yen staged a rebound versus the greenback, up 0.6%, after hitting a fresh low since December 2015 overnight on the difference in rate hike expectations between the Bank of Japan and other major central banks.

Analysts flagged that the Bank of Japan (BOJ) provided a bullish signal as it refrained from stepping into the market Friday morning, even as the 10-year government bond yield rose above the level at which the central bank had offered to buy an unlimited amount in February.

However, Governor Haruhiko Kuroda clarified that a weak yen benefits the economy.

"We don't expect a significant further depreciation of the yen versus the dollar. We think that at 115, it is fairly valued considering the Japanese central bank's dovish stance," Roman Ziruk, market analyst at Ebury, said.

The Norwegian crown was down 0.2% lower against the euro after rising the previous day as the central bank raised its benchmark interest rate and said it now plans to hike at a faster pace than previously intended.