Data showed that U.S. gross domestic product expanded at a 3.7 percent annual pace in the second quarter instead of the 2.3 percent rate reported last month. Further brightening the U.S. picture was a fall in U.S. jobless claims to 271,000 last week.
Meanwhile, Wednesday's comments from from New York Fed President William Dudley, a voting member of the rate-setting Federal Open Market Committee, downplaying prospects of a September rate hike helped improve sentiment. Investors unwound recent moves that had lifted both the yen and the euro.
On Thursday, Kansas City Fed President Esther George, who had argued for a near-term rate increase, echoed Dudley's sentiment. She told Fox Business News that central bankers should take a "wait-and-see" approach to tightening policy due to a financial market sell-off and China's slowdown.
John Doyle, director of markets at Tempus Consulting in Washington, said even if the Fed delays raising rates this year, monetary tightening "is still the conversation we're having."
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"We are still moving toward a normalization of U.S. policy, which differs from our trading partners."
In late trading, the dollar was up 0.7 percent against a currency basket at 95.78. The index has risen roughly 2.4 percent the last three days.
The dollar was up 0.74 percent at 121.03 yen, well above a seven-month low of 116.15 yen struck this week. The euro was 0.82 percent lower against the dollar at $1.1244, well below this week's seven-month high of $1.1715.
A recent spike in risk aversion had triggered short-covering in the yen and euro, which are popular funding currencies for carry trades. Such trades involve selling low-yielding currencies to buy higher-yielding assets.