The pound recovered some of its losses towards the end of the week after Donald Trump lashed out at the Federal Reserve.
In an interview with CNBC, the US president said he was "not thrilled" about US interest rate hikes in an extraordinary attack on Federal Reserve chairman Jerome Powell.
During trading on Friday, the pound was up 0.71% against the dollar at 1.310.
The lift comes after sterling took a dive on poor retail sales data on Thursday, which has left economists divided over whether the Bank of England will choose to raise rates next month.
The euro also strengthened against the dollar, up by 0.56% to 1.170.
Further comments made by Mr Trump on trade on Friday afternoon have accelerated the dollar's decline, and contributed to falls on European indices.
In a series of tweets, the US president criticised both China and the EU, saying they had been "manipulating their currencies".
The FTSE 100 closed the session 5.18 points lower at 7,678.79. In Europe, France's Cac 40 was down 0.36%, while Germany's Dax was knocked 0.87%.
"Not only lambasting China but the European Union as well, all the while throwing more shade at the Federal Reserve, Trump sparked another round of market chaos on Friday," said Connor Campbell, financial analyst at SpreadEx.
"One of the main casualties was the dollar; it had initially withstood the President's criticisms of the Fed's recent greenback-strengthening rate hikes, only to end up knocked off its perch following a further attack."
After a volatile week of trading, oil prices were on the up on Friday afternoon, with Brent crude rising 0.9% to 73.171 US dollars a barrel.
In UK stocks, Unilever hit the halfway point of its major share buyback programme after returning around 3 billion euro (£2.7 billion) to investors.
The consumer goods giant said it has now completed the first tranche and will launch the second round in order to purchase around 6 billion euro (£5.4 billion) worth of shares by year-end. Shares closed the session 31p higher at 4,361.5p.
Shares in Beazley fell 8.5p to 549p after the insurer blamed lower investment returns for sending profits down 64% in the first half of the year.
The firm said it suffered a significant drop in pre-tax profits, which tumbled from 158.7 million US dollars (£122 million) to 57.5 million US dollars (£44 million) in the six months to June 30.
Experian's takeover of ClearScore was in the spotlight as the competition watchdog threatened to launch an in-depth investigation into the £275 million deal, citing concerns that it could lead to consumers paying more for credit cards and loans.
The Competition and Markets Authority (CMA) said on Friday that it was concerned that an enlarged company may be less likely to innovate to help people better understand their finances. Experian's shares closed flat at 1,933.5p.
The biggest risers on the FTSE 100 were DS Smith up 14.9p to 506p, British American Tobacco up 98p to 3,960p, Ocado Group up 25.5p to 1,083p and GVC Holdings up 18p to 1,098p.
The biggest fallers on the FTSE 100 were Rentokil down 6.5p to 339.4p, Just Eat down 15p to 863p, EasyJet down 27p to 1,615p and Glencore down 5.1p to 311.65p.
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