The greenback declined on Thursday, retreating from three-month highs against a basket of currencies despite better than expected durables orders and initial jobless claims showed confidence is increasing in U.S. economy. The ICE Futures U.S. dollar index, which measures the dollar against other currencies, fell 0.1%.

U.S. durable goods rose by only 0.2% versus the expectation of 0.5% rise. U.S. jobless claims came in at 452,000, less than economists' forecast of 470,000.

The single currency extended its correction of recent decline on Thursday. Despite a holiday in Germany, euro climbed in European morning and price hit an intra-day high of 1.4419. However, euro was unable to substain intra-day strength and price retreated to around 1.4350 in NY afternoon session (U.S. stock market only opened for the morning session) before stabilizing.

The British pound rose in tandem to 1.6023 in European morning on active short-covering in thin trading on Christmas Eve as many traders were away. Cable later retreated sharply to an intra-day low of 1.5925 (2 ticks above Tuesday's low of 1.5923) in NY morning on active crossing selling in sterling with eur/gbp rose from 0.8970 to 0.9019. Sterling's weakness was partly attributable to reports that some investors were concerned that U.K. elections next year could lead to rare political deadlock.

The greenback rebounded strongly against the yen from Asian low of 91.13 and the pair eventually rose to intra-day an high of 91.79 in NY before retreating due to profit taking.

Data to released on Friday include Japan unemployment rate, household spending, national CPI, housing starts and construction orders. Friday will be market holiday for all G7 countries except Japan.