NEW YORK, May 23 (Reuters) - The euro pared gains sharply on Friday, after U.S. President Donald Trump once again ratcheted up his trade war, recommending the European Union be hit with 50% tariffs beginning June 1, rekindling concern about the impact of duties on the world economy and global trade.
Trump said in comments on social media that the EU was "very difficult to deal with" and "our discussions with them are going nowhere."
He threatened in a separate post to impose a 25% tariff on Apple AAPL.O iPhones not made in the United States.
"One of the challenges I'm finding in the FX space ever since these this reciprocal tariff thing came out is how we're not seeing this traditional risk on, risk off behavior with the dollar," said Erik Bregar, director of forex & precious metals risk management, at Silver Gold Bull in Toronto.
"This morning's news is very euro-specific, so that's the reason it's bumped euro and buy dollars initially, but zooming out, it feels like we move between the de-dollarization trade and taking it off, depending on what headline we get, and that's a bit of a new paradigm."
The dollar index , which measures the greenback against a basket of currencies, fell 0.48% to 99.43 after dropping as much as 0.77% to 99.135 on the session.
The euro was up 0.38% at $1.1323 after climbing as much as 0.83% to 1.1374 on the day.
For the week, the greenback is down 1.5%, on track for its biggest weekly percentage decline since mid-April while the euro was up 1.4% on the week.
Bregar said a high number of options on the euro that were due to expire today may also have limited the move on the tariffs announcement. In addition, Treasury Secretary Scott Bessent said Trump's declaration was in response to the EU's pace on tariff talks, indicating it may be a negotiating tool.
Against the safe-haven Japanese yen , the dollar weakened 0.87% to 142.75 after falling as much as 1.1% on the day. For the week, the greenback is down 1.9% against the Japanese currency.
The Japanese currency got a boost earlier from data showing Japan's core inflation accelerated at its fastest annual pace in more than two years in April, raising the odds of another interest rate hike by year-end from the Bank of Japan.
The data underscores the dilemma facing the Bank of Japan, which must grapple with price pressures from persistent food inflation as well as economic headwinds from Trump's tariffs.
Super-long Japanese government bonds have also scaled record highs this week, although yields dipped on Friday.
After Moody's last week downgraded its U.S. debt ratings, investor attention has focused on the country's $36 trillion debt pile and Trump's tax bill, which could add trillions of dollars more to it.
The bill narrowly passed the Republican-controlled U.S. House of Representatives and now heads to the Senate for what is likely to be weeks of debate, keeping investor sentiment fragile in the near term.
Sterling strengthened 0.54% to $1.3487 after climbing as much as 0.88%. For the week, the pound is up 1.6%.
Reporting by Chuck Mikolajczak Additional reporting by Ankur Banerjee in Singapore and Amanda Cooper in London Editing by Frances Kerry
