The US dollar was heading for its worst weekly performance since late July on Friday as traders increased bets that the Federal Reserve will cut rates again next month.

The dollar has dropped this week as traders conclude that weakening labor data will lead to more rate cuts, even as many Fed policymakers express concern about still-elevated inflation.

"It feels like with the post-shutdown run of releases, it's generally been soft ... the data overall definitely leaned towards a cut," said Eric Theoret, FX strategist at Scotiabank in Toronto.

The US federal government is releasing a backlog of economic data after reopening from a record 43-day shutdown.

Fed funds futures traders are pricing in 87 percent odds of a cut at the conclusion of the Fed's December 9-10 meeting, up from 71 percent a week ago, according to the CME Group's FedWatch Tool.

Fed officials will enter a blackout period on Saturday ahead of the meeting.

The dollar index , which measures the greenback's strength against a basket of six major peers, was last down 0.09 percent at 99.44, and on track for a 0.61 percent weekly loss, its largest since July 21.

Bank of Japan Governor Kazuo Ueda is due to speak on Monday, and traders will focus on whether he signals a likely rate increase at the BOJ's December meeting, which could continue to lift the currency.

"There's obviously a lot of anticipation around the Bank of Japan meeting in December. Will they hike rates? Will they not hike rates? And up until now, Ueda has been reasonably non-committal/dovish and hasn't really signaled a December hike yet," said James Lord, head of FX and emerging market strategy at Morgan Stanley.

"But with dollar-yen at these levels and the fiscal package that has been announced by the government, there's a possibility that we will see a rate hike in the December meeting," Lord said.