By Anneken Tappe

The U.S. dollar strengthened against its main rivals early Friday in New York, though the currency was still looking at an almost 1% weekly loss, while the British pound pulled back from its highs amid souring sentiment around Brexit negotiations.

The ICE U.S. Dollar Index was 0.1% stronger at 94.028 on Friday, but still headed for a 0.9% weekly decline, its worst in a month. Shorter-dated U.S. Treasury yields were on the rise on Friday, with the 2-year yield adding rising to 2.81% and the 10-year yield holding above 3%, which lent some support to the greenback.

On the Brexit front, European Union leaders rejected the U.K.'s post-Brexit proposal, adding pressure for Prime Minister Theresa May, whose Conservative Party is holding its annual conference next week.

(https://twitter.com/VPatelFX/status/1043020804278050816)

The next Brexit summit is scheduled for November, but this week's talks in Salzburg, Austria, seems to have soured the mood amid both politicians and investors.

The British pound was thus unable to hold on to its gains from earlier in the week (http://www.marketwatch.com/story/dollar-slides-as-british-pound-and-new-zealands-kiwi-rally-on-data-2018-09-20) when hopes for a Brexit resolution had been high. Sterling last fetched $1.3197, down from $1.3268.

Read:Far-right candidate leads Brazil's polls as investors worry about reforms, ailing real (http://www.marketwatch.com/story/far-right-candidate-leads-brazils-polls-as-investors-worry-about-reforms-ailing-real-2018-09-20)

Elsewhere in Europe, Italy's governing coalition is under pressure has the leader of the 5 Star Movement has threatened to leave over public spending that would widen the deficit. 5 Star leader Luigi di Maio and Northern League leader Matteo Salvini clashed with Finance Minister Giovanni Tria over this. Investors are awaiting Italy's budget proposal, which some worry won't be in-line with the EU requirements and could lead to a spat between Rome and Brussels.

The euro was modestly lower at $1.1770, compared with $1.1779 late Thursday in New York.

(END) Dow Jones Newswires

September 21, 2018 08:38 ET (12:38 GMT)