The dollar rose against the euro for the first time in four days after an unexpected surge in U.K. retail sales led traders to sell the 15-nation currency versus the greenback and buy the pound. The pound increased to a two-week high versus the euro and advanced for a second day against the dollar. Falling in crude oil price also supporting the greenback versus the euro. The Swiss franc retreated versus all of the other major currencies after the Swiss National Bank left its target lending rate at 2.75 percent, one of the lowest among industrialized countries.

The euro fell as low as 1.5467 in overnight trade. It recovered some losses as data showed factory activity in the U.S. Mid-Atlantic region slowed further in June. The New York Board of Trade's dollar index, which charts the dollar's performance against a basket of six currencies, rose to a session high of 73.594 and last traded at 73.482.

Sterling rallied to an intra-day peak of 1.9744 due to the surprise jump in retail sales in May that raised expectations the Bank of England will raise interest rates, cable drove to its highest level in over a week against the dollar and spark a rally versus the euro. The pound also climbed against the euro and pushed the single currency to 0.7982.

While the Federal Reserve had turned hawkish due to rising price pressures ignited by record oil prices, analysts believe it is unlikely to raise U.S. interest rates before year-end as the economy remains sickly. U.S. crude futures tumbled sharply after news that China will raise gasoline and diesel prices. High oil prices have fanned inflation pressures and concerns about their impact on global growth.

A Swiss National Bank decision to leave interest rates unchanged at 2 percent despite inflation at multi-year highs had some psychological effect on the market, but analysts cautioned against reading too much into the move. There had been suggestions that the Swiss bank's decision could mean the European Central Bank would not tighten policy further after an anticipated rate increase in July. Dollar and euro reversed their earlier losses against the Swiss franc ahead of the SNB decision and rose to 1.0459 and 1.6219 respectively.

On Friday, economic data releases include Germany's PPI data (May), Switzerland’s combined PPI data (May), and Canada's retail sales data (April).