1520s, from hand + kerchief, originally "cloth for covering the head," but since Middle English used generally as "piece of cloth used about the person." A curious confluence of words for "hand" and "head." By-form handkercher was in use 16c.-19c. A dropped handkerchief as a token of flirtation or courtship is attested by mid-18c.
handicapped
handicraft
handily
handiwork
hand-jive
handkerchief
handle
handlebar
handler
handling
hand-loom