The U.S. dollar came under pressure in the Asian session on Friday, as inflation fears receded and encouraging U.S. jobless claims data signaled that the economic recovery is underway.

Data from the Labor Department showed that U.S. jobless claims dropped more than expected in the week ended May 15.

Initial jobless claims fell to 444,000, below forecasts for 453,000.

U.S. treasury yields fell after a manufacturing survey from the Philadelphia Fed fell more than expected in May.

The Philadelphia Fed Manufacturing Index fell to 31.5 in May from 50.2 in April. Economists had forecast a score of 43.

Risk sentiment improved as investors shifted their focus to growth prospects, while a drop in commodity prices helped recede fears over inflation.

The greenback depreciated to 2-day lows of 108.68 against the yen, 1.2240 against the euro and 1.4201 against the pound, after rising to 108.90, 1.2221 and 1.4169, respectively in early deals. The currency is likely to face support around 106 against the yen, 1.24 against the euro and 1.44 against the pound.

The greenback slipped to a 3-month low of 0.8954 against the franc, off an early high of 0.8979. On the downside, 0.88 is likely seen as its next support level.

In contrast, the greenback rose to 1.2089 against the loonie, 0.7178 against the kiwi and 0.7742 against the aussie, up from its prior lows of 1.2053, 0.7204 and 0.7778, respectively. The greenback is seen finding resistance around 1.25 against the loonie, 0.70 against the kiwi and 0.75 against the aussie.

Looking ahead, PMI reports from major European economies are due in the European session.

Canada retail sales for March and wholesale sales for April and U.S. existing home sales for the same month will be published in the New York session.

At 10:00 am ET, Eurozone flash consumer sentiment index for May will be out.

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