By Kevin Buckland

U.S. dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo

TOKYO, March 21 (Reuters) - The U.S. dollar climbed against major peers on Friday following its best single-day performance for three weeks with the Federal Reserve indicating no rush to cut interest rates.

The risk-sensitive Australian and New Zealand dollars edged further down after steep slides on Thursday as worries about the economic drag from U.S. President Donald Trump's aggressive campaign of global trade tariffs dented sentiment.

The dollar index measure against a basket of six counterparts was 0.21% higher at 104.01 as of 0436 GMT, after strengthening 0.36% on Thursday.

The index plumbed a five-month low at 103.19 this week following a steady decline from the highest since late 2022 at 110.17 on January 13 as hopes for expansive policies under Trump gave way to anxiety that the global trade war he started could trigger a U.S. recession.

Fed policymakers held rates steady on Wednesday and signaled two quarter-point cuts for later this year, the same median forecast as three months ago.

"We're not going to be in any hurry to move," Fed Chair Jerome Powell said, underscoring the challenge policymakers face in navigating Trump's erratic tariffs, and the potential impact on the domestic economy.

A new round of reciprocal levies is expected on April 2.

"We see some signs of a potential turn in the USD ... with price now pushing into the range highs of this recent consolidation phase," said Chris Weston, head of research at Pepperstone.

"As we head into the April 2 Trump reciprocal tariff announcement, there is an increased risk that market players trim back on USD shorts and look to run a more neutral position."

The euro , which has by far the heaviest weighting in the dollar index, slipped 0.18% to $1.0831 after dropping 0.45% on Thursday.

"It seems the market has lost some confidence to bid EUR/USD into 1.1000, and the spot rate seems to be carving out a 1.0950 to 1.0800 range," Weston said.

Sterling eased 0.19% to $1.2943.

The dollar added 0.42% to 149.40 yen .

On Wednesday, the Bank of Japan refrained from raising rates again, and warned of heightening economic uncertainty in the wake of ramped-up U.S. tariffs on trading partners.

"The overall impression left by (BOJ Governor Kazuo Ueda's press) conference suggested that his underlying outlook remained cautious," said Shoki Omori, chief desk strategist at Mizuho Securities.

"Considering that the Fed is unlikely to rapidly shift to a dovish stance, it is expected that the cross-yen rates -particularly the dollar-yen pair - will either remain stable within a narrow range or continue to trend toward yen depreciation."

The Antipodean currencies, which are not part of the dollar index, suffered larger losses on Thursday.

The New Zealand dollar edged down 0.13% to $0.5750 in the latest session, after tumbling more than 1% the previous day. The currency lost ground despite data on Thursday showing the economy crawled out of recession last quarter.

The Aussie weakened 0.21% to $0.6290 following a 0.86% slump on Thursday.

Reporting by Kevin Buckland Editing by Shri Navaratnam

Reuters report

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