The dollar touched a two-week high against the yen on Friday and rose from a two-month low versus a basket of major currencies, supported by signs that the U.S. economy may be stabilizing after a recent soft patch.
U.S. economic reports were mixed, with consumer sentiment strong but manufacturing and construction weak. The net effect of the data was positive on the dollar, which investors viewed as oversold. Volumes was thin, with most of Europe shut for the May Day holiday.
Yields on long U.S. Treasury debt hit seven-week highs, which helped attract investors to the greenback.
"The numbers were mixed and while there has been some improvement in the data, we're still waiting for more evidence that the U.S. economy has indeed turned the corner," said John Doyle, director of markets at Tempus Consulting in Washington.
U.S. manufacturing activity held a near two-year low in April, but a jump in consumer sentiment suggested the economy was pulling out of a weak phase in its cycle. Separately, construction spending slipped 0.6 percent to an annual rate of $966.6 billion, the lowest level since September.
The dollar started to gain momentum on Thursday after data signaled that the U.S. labor market was recovering with initial jobless claims dropping, wages rising along with a jump in Midwest business activity.
"We maintain that the (recent) sell-off in the greenback is likely to run out of steam," said Jane Foley, senior FX strategist, at Rabobank in London.
"If the dollar sell-off persists, there is risk that several central banks will reassert their dovish positions in order to ensure that relative interest rate differentials remain clearly in favor of the greenback."
In late trading, the dollar rose against the yen, supported by the rise in Treasury yields. It was last up 0.7 percent at 120.24 yen. It hit a two-week high of 120.28 yen.
The dollar index was up 0.7 percent at 95.257, having suffered its worst month in four years in April. The index on Friday posted its best daily gain in a month.
The euro slid 0.2 percent to $1.1196, after earlier hitting a two-month peak. The euro has been aided recently by a surge in German yields as fears of deflation in Europe have eased.