NEW YORK, March 31: The dollar turned lower on Friday as a move by Washington to slap trade sanctions on China sparked fears of a rise in protectionism that dented the greenback's recovery.

The euro rose to $1.3356 from $1.3331 in New York late on Thursday, and briefly hit a two-year high of $1.3400. The US currency stood at 117.81 yen, down from 118.02 yen late on Thursday.

News of US plans to impose sanctions on some Chinese imports hurt the greenback amid speculation that China would take retaliatory action.

Stephen Malyon at Scotiabank said the announcement by the US Commerce Department “sabotages what would have been a steady week for the dollar.””The currency market regarded the measure as a negative for an economy (the United States) that has enjoyed the benefits of cheaply-produced foreign goods,” Malyon added.

CMC Markets analyst Ashraf Laidi said the move was reminiscent of Washington's action in 2002 to impose tariffs on steel imports.

The US dollar peaked in February 2002, the same month of the US administration's decision to slap tariffs on foreign steel,” he said.

The decision, albeit reversed by the WTO more than a year later, helped trigger a 58 per cent depreciation in the dollar against the euro, 13 per cent decline against the yen, and a 32 per cent drop in trade-weighted terms. He said Friday's announcement “will likely trigger possible retaliatory acts from China such as further diversification of its forex reserves, which will likely hit the US currency.

The pound was being traded at $1.9679 from 1.9620.---AFP