The dollar index was down 4.1% for July, its biggest monthly percentage fall since September 2010, with most of the drop coming in the last 10 days as new coronavirus cases surged across several U.S. states and some recent data pointed to an economic recovery losing steam.

On Friday, the dollar mostly held gains after data showed U.S. inflation-adjusted consumer spending has pulled out of April's deep hole but remains below its pre-pandemic level, and the currency strengthened as the session wore on.

After sliding as low as 92.539 earlier, the lowest since May 2018, the dollar index was last up 0.6% at 93.377.

"You had the dollar enter into a very serious decline over the month," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Interest rates are going down, and that makes the dollar much less attractive as a yield play, but (also) the market is starting to become aware of the political risk of the dollar."

"Today, we're just seeing a little bit of short covering, and a little bit of risk off always creates flows into the dollar."

On Thursday, confidence in the dollar was undermined after U.S. President Donald Trump raised the possibility of delaying the Nov. 3 presidential election.

The euro was at $1.1786, down 0.51% on the day.

The currency was little moved by data showing the euro zone economy recorded its deepest contraction on record in the second quarter while the bloc's inflation unexpectedly ticked up in July.

The euro traded below $1.10 as recently as May, but after European Union leaders agreed this month to a 750 billion euro economic recovery fund - while also taking on debt jointly in a major boost to regional cooperation - many investors have warmed to the currency again.

On a trade-weighted basis, the euro is at its highest since 2014.

The dollar's drop this month has created space for a rebound in currencies hit hard in March, when investors rushed for the safety of the greenback as panic over the coronavirus gripped markets.

Against the Japanese yen, the dollar earlier hit a 4-1/2-month low but last stood at 105.77, up 1%.

The British pound was at $1.3097, up 0.03% on the day.

By Caroline Valetkevitch