TOKYO (Reuters) -The U.S. dollar was broadly firmer on Friday with the euro pulling further away from a five-month peak as markets grappled with escalating global trade tensions and risks of a sharp economic downturn.

Elsewhere, the yen gave up more of its recent gains as markets backed off a small chance of the Bank of Japan (BOJ) raising interest rates in May.

Sowing more volatility across markets, U.S. President Donald Trump threatened to hit imports of wine, cognac and other alcohol from Europe with a 200% tariff. 

The escalating tensions between the traditional allies came after the EU bloc announced plans to impose levies on American whiskey and other products next month, itself a response to U.S. tariffs on steel and aluminium imports.

The euro edged down to $1.0846 after sliding further off Tuesday's five-month peak the previous day as the EU-U.S. trade spat rattled markets and Germany struggled to pass a massive spending proposal.

Hopes of an imminent ceasefire between Ukraine and Russia were also fading as Moscow said it supported the U.S. proposal but suggested it would need some serious reworking.

The softer euro helped lift the dollar index, which measures the greenback against a basket of currencies, further away from Tuesday's trough of 103.21, its lowest since mid-October.

The dollar index last rose 0.12% to 103.95, on track for a third straight days of gains, though concerns simmered about the outlook for the U.S. and broader global economy.

"I think the million-dollar question with whatever asset class you're looking at is ... where do we start to find the news that's going to turn around risk sentiment? And at this point in time, it's not clear," said Tony Sycamore, a market analyst at IG.

Since climbing to a six-month peak back in January, the dollar has fallen more than 5% as the U.S. exceptionalism narrative started to fray, with the S&P 500 tumbling into correction territory on Thursday.

A potential U.S. government shutdown added to uncertainties, although top U.S. Senate Democrat Chuck Schumer on Thursday said he would vote to advance a Republican stopgap funding bill, signalling that his party would provide the votes to avert a shutdown. 

WAGE RESULTS AWAITED

The yen walked back some of its gains on Friday, after strengthening to as high as 146.545 per dollar earlier this week on safe-haven bids and market bets for further rate hikes in Japan.

But a report by local media on Thursday that suggested the BOJ is in no rush to raise rates in May, as a portion of market players had been betting, weighed on the currency, said Nomura Securities currency strategist Jin Moteki.

Meanwhile, first-round results of Japan's spring wage negotiations are due later in the day. The negotiations are expected to result in wage increases of around 5.3%, in line with market expectations and BOJ forecasts, Moteki said.

"I think that it will support the BOJ over the medium term, but it cannot be the reason to raise (rates) at its May meeting," he said.

Economists and markets see the central bank standing pat at its meeting next week as policymakers gauge global risks.

The dollar last traded up 0.48% at 148.51 yen.

Sterling drifted around $1.2946 ahead of the release of gross domestic product figures for January, after falling in the previous session from Wednesday's four-month high of $1.2990.

The Canadian dollar wallowed at 1.4429 per U.S. dollar, with Canada caught in the tariff crossfire.

The Australian dollar fetched $0.6296, up 0.2% after slipping on Thursday, while the New Zealand dollar rose 0.3% to $0.57135.

In cryptocurrencies, bitcoin was up about 2% at $82,016.70.