During U.S. morning trade, the dollar retreated from one-week highs against the euro, with EUR/USD edging up 0.06% to 1.3362, after falling to lows of 1.3298.
Demand for the dollar continued to be underpinned after the minutes of the Fed’s July meeting showed that officials were "broadly comfortable" with plans to start unwinding the bank’s USD85 billion-a-month bond buying program.
However, officials remain divided over the timing of possible reduction, with almost all committee members agreeing that a change in the asset purchase program was not yet appropriate.
The minutes described recent U.S. economic data as “mixed”, indicating that plans to taper could be pushed back if the economy was to weaken.
Data on Thursday showed that U.S. initial jobless claims rose more-than-expected last week, but remained close to six-year lows.
The Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week rose by 13,000 to a seasonally adjusted 336,000, slightly higher than forecasts for 330,000.
The euro remained supported after data showed that manufacturing activity in the euro zone expanded at the fastest pace in 26 months in August.
The flash euro zone manufacturing purchasing managers’ index rose to 51.3 from a final reading of 50.3 in July. Analysts had expected the index to inch up to 50.8.
The flash euro zone services PMI rose to a 24-month high of 51.0 from 49.8 in July, better than expectations for a reading of 50.2.
The dollar was trading close to three-week highs against the yen, withUSD/JPY up 0.88% to 98.54, off session highs of 98.81.
The yen extended losses against the dollar earlier after the upbeat euro zone data bolstered the outlook for the economic recovery in the region, dampening safe haven demand.
The dollar trimmed gains against the pound and the Swiss franc, withGBP/USD down 0.46% to 1.5589 and USD/CHF climbing 0.16% to trade at 0.9238.
Elsewhere, the greenback was broadly higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD up 0.57% to 0.9020,NZD/USD slipping 0.11% to 0.7837 and USD/CAD advancing 0.39% to 1.0512.
The growth linked Australian dollar was boosted earlier Thursday after economic data out of China eased concerns over a slowdown in the world’s second largest economy.
The preliminary reading of China’s HSBC manufacturing PMI rose to a four-month high of 50.1 in August, up from 47.7 in July. Economists had forecast a reading of 48.3.
In Canada, official data showed that retail sales unexpectedly fell by 0.6% in June, while core retail sales were down 0.8%, confounding expectations for a 0.1% increase.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.17% to 81.49.
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