The dollar remained on the back foot on Friday as global trade frictions and signs of weakness in the U.S. economy supported the case for more rate cuts by the Federal Reserve. The dollar index is set for its biggest weekly drop in almost three months as an extended shutdown of the U.S. government interrupted the publication of key economic data.

The yen rallied after Bank of Japan Governor Kazuo Ueda spoke about factors that could lead to a rate increase this month. Compounding concerns about trade, Fed independence and the U.S. shutdown are making the greenback vulnerable to the "debasement" trade, where investors seek assets that can't easily be devalued, said Pepperstone research strategist Dilin Wu.

"It's really hard to find a bullish scenario for the dollar index," said Wu. "Instea

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