The world's top reserve currency was still on track for a weekly loss as reduced trade tensions between China and the United States, together with encouraging developments between Britain and the European Union on terms for Britain's exit from the economic bloc, pared safe-haven demand for the dollar.
"Generally today's data showed strong results, which are supporting the dollar. Higher yields are also giving it a boost," said Brian Daingerfield, macro strategist at NatWest Securities in Stamford, Connecticut.
The US Commerce Department said domestic retail sales rose 0.1 percent in August, the smallest gain in six months, but July figures were revised higher, supporting the view of solid consumer spending in the third quarter.
Consumer spending, which accounts for two-third of the US economy, will likely hold firm as consumer optimism improved to its strongest since March, according to the University of Michigan.
Another bright spot was a 0.4 percent increase in industrial output last month.
Friday's data offset inflation data this week which fell of expectations, causing traders to dial back their bets that inflation is accelerating, analysts said.
The data also lifted Treasury yields, with the 10-year yield touching 3 percent for the first time in six weeks.
At 10:58 a.m. (1458 GMT), an index that tracks the dollar against six major currencies was up 0.25 percent at 94.753, trimming its weekly decline to 0.6 percent.
The euro climbed to a two-week high earlier on Friday following the disappointing US inflation data before retreating against the greenback. The common currency was down 0.2 percent at $1.16665, EBS data showed.
Sterling was 0.25 percent lower at $1.3073 after hitting $1.3145 earlier on Friday, its highest level since July 31, according to Reuters data.
Brexit talks are set to intensify over the coming week, with the first of three summits that EU leaders hope will settle an agreement for departing Britain within the next two months.
China's offshore yuan slipped 0.27 percent to 6.8641 per US dollar.
Data on Friday showed China's investment growth for August fell to a new record low, while industrial output and retail sales for the month rose more than expected.
Chinese officials welcomed an invitation from Treasury Secretary Steven Mnuchin for new talks to resolve the Sino-US trade conflict, although comments from US President Donald Trump tempered market expectations.