The dollar rose to one-week highs on Friday, for a fourth straight session of gains, on rate-hike remarks by a senior Fed official and generally positive U.S. data that supported the notion the world's largest economy was on a stable growth path.
The dollar index, a gauge of the greenback's value against six major currencies, bounced back from seven-month lows struck on Monday and was on track for its largest weekly gain in a month as financial markets calmed down after recent turmoil.
The index extended gains after Federal Reserve Vice Chair Stanley Fischer said the U.S. central bank can't wait for the case on hiking interest rates to be overwhelming. But he was undecided whether to raise rates in September.
Data released earlier showed U.S. consumer spending picked up 0.3 percent in July as households bought more automobiles, although U.S. consumer sentiment dipped a bit in August amid the global stock market turmoil.
"Overall, markets are finally starting to calm down and the economic data is relatively supportive of the dollar," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
"Once the panic is out of financial markets, what you will see is that the underlying growth in the U.S. remains on target. Even if there is no action in September, the Fed remains on target with regard to tightening monetary policy."
Some Fed officials on Friday were unfazed by the recent market turmoil and pushed for a rate hike.
"Nothing has happened here that is so radically changing the U.S. outlook that the basic trajectory of policy would change," said St. Louis Fed President James Bullard in an interview on the sidelines of a global central bankers' conference in Jackson Hole, Wyoming.
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Cleveland Fed President Loretta Mester echoed Bullard's sentiment and said the U.S. economy still could handle a modest rate hike, though she did not commit to backing a move next month.
In afternoon trading, the dollar index was up 0.51 percent at 96.10, having hit a one-week high of 96.324. After diving to a seven-month trough of 92.621 on Monday when global stock markets went into a tailspin, the index has bounced 3.0 percent the last four days.
Against the yen, the greenback rose 0.19 percent to 121.35 yen, a remarkable recovery from Monday's seven-month low of 116.15.
The yen showed little reaction to data showing Japan's inflation slowed to zero, its weakest in two years.
The euro, meanwhile, fell 0.49 percent to $1.1187, after hitting a session low of $1.1155, well off its lofty perch above $1.1700 reached on Monday when the selloff in global markets and worries about a Chinese slowdown led investors to unwind euro-funded carry trades.