The dollar finished lower for the second week in a row Friday as plunging U.S. stocks pushed volatility to uncomfortable levels, forcing investors to reevaluate their expectations for the timing of the first Federal Reserve interest-rate hike since 2006.

The ICE U.S. dollar index DXY, +0.12% , a measure of the dollar’s strength against a basket of six currencies, finished the week down 1.7% at 94.9720.

The monetary policy divergence trade — the notion that the Federal Reserve is tightening monetary policy while other central banks remain in easing mode — has helped the dollar appreciate over the past year.

But a confluence of destabilizing events — including last week’s depreciation of the Chinese yuan, the selloff in U.S. stocks and falling crude-oil prices — have caused market strategists to doubt a Fed rate hike will happen this year.

Some analysts now believe the Bank of England might raise interest rates ahead of the Fed.

Read: What we don’t know about Fed is still more than what we do

U.S. stocks DJIA, -1.84% SPX, -1.15% recorded their largest two-day decline since the financial crisis on Friday as the Dow Jones Industrial Average fell 530 points to 16,459.

“We have oil breaking below $40 and the stock market falling and that financial market volatility continues to push back expectations for when the Federal Reserve will raise interest rates,” said Matt Weller, senior technical analyst at Forex.com.

Higher rates would increase the return on dollar-denominated assets making the U.S. currency more attractive to foreign investors.

Among the G-10 currencies, gains were concentrated in the euro and the yen, with both currencies up more than 1% against the buck on Friday. USDJPY, +0.01% The dollar slid to ¥122.20 from ¥123.44 in late North American trade on Thursday, its lowest level against the Japanese currency in nearly two weeks. The euro EURUSD, -0.33% rose to $1.1360 against the dollar from $1.1215 on Thursday, its highest level in two months.

Cratering oil prices weighed on the currencies of major oil exporters like the Canadian dollar CADUSD, -0.18% , Norwegian krone NOKUSD, -0.52% and Russian ruble USDRUB, +0.14% . Meanwhile, emerging-markets currencies in Asia suffered from a mix of falling commodity prices and signs that the Chinese economy has continued to weaken.

Earlier on Friday, the preliminary Caixin China Manufacturing Purchasing Managers’ Index, a gauge of nationwide manufacturing activity, dropped to a 77-month low of 47.1 in August, compared with a final reading of 47.8 in July.

Read: Emerging-market currencies also fell on Friday