The dollar declined on Friday, along with US Treasury yields, while investors looked ahead to next week's Federal Reserve meeting for more clarity on the outlook for rate hikes.

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Expectations that the Fed will tighten monetary policy at a faster pace than previously anticipated had driven a rise in yields and the dollar earlier this week, and the US dollar index was set for biggest weekly percentage gain since mid-December.

US Treasury yields fell as stock market declines reflected poor risk appetite, while concerns about potential conflict in Ukraine drove demand for the safe haven debt.

Markets are pricing in as many as four rate hikes this year, starting from March and expect the Fed to start trimming its $8 trillion-plus balance sheet within months. Next week's Fed meeting could shed some light on how fast it will tighten.

Also Read | How major US stock indexes fared Friday

"Everything is going to be somewhat calm" until the Fed releases its statement on Wednesday after the two-day meeting, said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

"It makes sense the dollar is somewhat muted today given the lack of real impetus from the data front."

The dollar index, which tracks the greenback against major peers, was down 0.1 percent on the day at 95.650 but up 0.5 percent for the week.

In cryptocurrencies, bitcoin was also dragged lower and hit its lowest level since August. It was last down 6 percent, while ether was down more than 8 percent.

Against the yen, the dollar was last down 0.4 percent at 113.680. For the week, the dollar was down about 0.5 percent against the yen. The euro was last up 0.3 percent against the dollar at $1.1341, while it was down about 0.6 percent for the week.

Retail sales in Britain added to recent weaker economic data. The pound was down 0.3 percent against the dollar at $1.3553.

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(Edited by : Yashi Gupta)