The dollar held firm on Friday, a day after a strong retail sales report added to a string of upbeat news on the US economy and suggested the Federal Reserve would keep raising interest rates at a steady pace. The retail sales figures came on the heels of data showing improvement in the giant US trade and budget deficits that have long dogged the currency. Adding to the dollar's allure, the S&P 500 hit a four-year high on Thursday.
"Dollar sentiment is very strong," said Katsunori Kitakura, senior treasury manager at Chuo Mitsui Trust and Banking in Tokyo. "The market is now expecting some fairly bullish testimony from Greenspan next week."
Fed Chairman Alan Greenspan is slated to give his semi-annual testimony on the US economy to Congress on Wednesday.
The Bank of England is due to release minutes on Wednesday of its July 6-7 monetary policy meeting, at which the central bank kept rates at 4.75 percent.
If the minutes show the number of Monetary Policy Committee members voting for a rate cut had increased from two at the previous meeting, sterling could take a hit. The committee has nine members.
On the other hand, upbeat data on the US economy has convinced many traders that the Fed is set to push its funds rate to around 4 percent by year-end.
The euro bought $1.2105, up slightly from its level in late New York trade, but still well below a one-month high of around $1.2255 hit on Tuesday. It hit 14-month lows near $1.1870 last week.
Buying from speculators drove the single European currency to two-month highs of 136.05 yen, traders said. It later retreated to around 135.65 yen.
With the euro having fallen 11 percent against the dollar this year partly on worries the European Central Bank could soon cut rates, some investors said the single currency was oversold.
Sterling was 0.2 percent higher at $1.7595, well above a 19-month low of $1.7310 hit after the London bombings. Against the Japanese currency, the dollar fetched 112.20 yen, after rising as far as 112.40 yen - just short of 14-month highs above 112.60 yen.