The dollar rose on Friday after fresh U.S. data supported the view the world's largest economy is improving enough to keep the Federal Reserve's stimulus-reducing measures on track.
U.S. industrial output rose at its fastest clip in 3-1/2 years in the fourth quarter, data showed Friday. Separately, groundbreaking for new homes last month dropped 9.8 percent, the largest percentage decline since April, but housing starts were coming off a multi-year high in November.
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The dollar index, a gauge of the dollar's value versus six major currencies, rose 0.3 percent to 81.11. In early afternoon trading, the euro was down 0.5 percent against the dollar to $1.3555.
"Overall, the U.S. economy is making steady, if uneven, progress and that should keep intact expectations for sustained Fed tapering this year," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"U.S. Treasury yields haven't budged much, so as long as they hold near their elevated levels, that should continue to underpin the dollar."
(Read more: 2014 a 'litmus test' for Australia economy: Goldman)
The British pound, meanwhile, was one of the biggest movers of the day, rising 0.5 percent to $1.6434 following strong UK retail sales data.
British retail sales spiked 2.6 percent in December to show an annual rise in volumes of 5.3 percent—the fastest growth since October 2004—Office of National Statistics data showed on Friday.
