The dollar rose against a basket of currencies on Thursday after data showed the world's largest economy produced solid growth in the fourth quarter, reviving the appeal of the greenback even against the safe-haven yen and Swiss franc.
The initial reading of fourth-quarter U.S. gross domestic product came in at annualized rate 3.2 percent, matching analysts' forecasts. This followed a 4.1 percent rise in the third quarter, bringing the year-over-year growth rate to 1.9 percent.
The GDP reading should reinforce the notion that the Federal Reserve will continue reducing its monetary stimulus in the coming months, pushing up U.S. bond yields and making the dollar more attractive.
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"All these factors are supportive of the dollar," said Jonathan Lewis, founding principal of Samson Capital Advisors in New York. "While the overall profile on the U.S. hasn't changed, the economy continued to muddle along on a healing path."
However, the recent flare-up in political and currency woes in Turkey, Argentina and South Africa has limited the dollar's upward move, with some traders preferring the yen and Swiss franc, analysts said.
"People are not sure whether we have hit the bottom of this emerging market panic," said Marc Chandler, chief global currency strategist with Brown Brothers Harriman & Co. in New York.
(Read more: After Fed, focus shifts to emerging markets)
The Turkish lira and South African rand rebounded in New York trading after selling off in Asian trading in response to further stimulus reduction from the U.S. central bank. Billions of dollars from the Fed stimulus program had flooded into Turkey, South Africa and other fast-growing economies.
The Fed, as expected, said on Wednesday it will reduce its monthly bond purchases by $10 billion in February to $65 billion as policymakers reckoned the U.S. economy needs less stimulus.
In a Reuters poll, 17 of the U.S. primary dealers surveyed forecast another $10 billion monthly cut in the Fed's third round of quantitative easing in March.
Currencies
The Turkish lira and the rand have stabilized after their central banks hiked local interest rates in an attempt to shore up investor confidence.
As anxiety that emerging markets' troubles would spread subsided a bit, investors reduced their safe-haven holdings of the yen, Swiss franc and U.S. and German government bonds. They moved some cash back into the dollar, stocks and other riskier investments.
The dollar was up 0.7 percent against a basket of currencies at 81.10.
(Read more: Who pulled the trigger on emerging markets?)
The euro was down 0.8 percent against the dollar at $1.3549.
The greenback was up 0.4 percent against the at 102.71 yen. It has retraced about 0.8 percent from the seven-week low set on Monday.
The dollar also gained against the Swiss franc, rising 1 percent to 0.9033 Swiss franc.
—By Reuters