The safe-haven yen gained more ground on the dollar on Friday as US President Joe Biden said Moscow is preparing a pretext to justify a possible attack on Ukraine, also supporting the Swiss franc and hurting bitcoin.

The dollar slipped to a new two-week low of 114.78 yen in early Asia trade, and is down 0.5% so far this week.

"The support level of 114.63 looks within reach today if more negative headlines on Ukraine emerge," said CBA analysts in a morning client note, adding that markets were also focused on the Bank of Japan's policy, as the central bank continues with its policy of yield curve control.

Early morning exchanges of fire on Thursday between Kyiv's forces and pro-Russian separatists - who have been at war for years and where a ceasefire is periodically violated - have renewed Western fears of an imminent Russian invasion.

US President Joe Biden said Moscow is preparing a pretext to justify a possible attack and the Kremlin expelled an American diplomat.

These tensions also caused the dollar to lose ground on the Swiss franc, with the greenback last at 0.9196 francs, just above Thursday's two week intraday day low of 0.9186 francs.

At the other end of the risk spectrum, bitcoin was trading around $40,500, around a two-week low, after a tumble late on Thursday left it down 7.6% on the day.

"Crypto has shown us once again that it is a high beta risk asset, and it has a dark sinister look that could morph into something ugly," said Chris Weston, head of research at Melbourne based brokerage Pepperstone in a morning email.

The euro continued its week of choppy trading based on Ukraine headlines and was at $1.1360, while the pound was at 1.3609 supported by markets betting on more monetary tightening from the Bank of England.

Central bank policy was also a factor in the yen, after the BOJ this week offered to buy an unlimited amount of benchmark 10 year government bonds to underscore its resolve to contain domestic borrowing costs.

Markets have not aggressively tested the BOJ's 0.25% yield target on those bonds, but yields on other tenors have been rising.

Meanwhile, in the United States, policy makers have continued to publicly debate how aggressively the Federal Reserve should raise interest rates, and whether it should begin with a 25 or 50 basis point hike at its March meeting.

Cleveland Fed President Loretta Mester said late on Thursday the Fed would need to raise interest rates at a faster pace and shrink its balance sheet more quickly than it did after the 'great recession'.