The yen weakened and sterling rose on Friday after analysts at ratings agency Moody's said UK and U.S. sovereign credit ratings were not under threat at the moment, helping support investors' risk appetite.
Attention turned to U.S. retail sales data, which some analysts said had the potential to reverse euro gains versus the dollar in the wake of peripheral euro zone government bond yield spreads tightening versus German Bunds.
U.S. November retail sales excluding automotives are forecast to rise by 0.4 percent month-on-month.
Should that be a larger gain of close to 1.5 percent, we could see a reversal of the dollar's losses versus euro, said Peter Wuyts, a market analyst at KBC in Brussels.
Solid Chinese economic data also encouraged investors to unwind long yen positions as the year-end approached, a move backed by a corresponding rise in global equity markets.
But the rise in appetite for so-called riskier assets was not particularly striking.
The dollar's trade-weighted value was little changed, and currencies like the Australian and New Zealand dollars that are closely correlated with risk and economic growth weakened against the dollar, although they rose against the yen.
We've had a slight move down in the yen, and risk is back on. But it's a bit difficult to get too excited, said Niels Christensen, currency strategist at Nordea in Copenhagen.
At 1107 GMT (6:07 a.m. EST), the dollar was up 0.9 percent at 88.96 yen and the euro was up 1 percent at 131.24 yen. The euro edged higher against the dollar at $1.4757.
We are seeing a tight range in euro/dollar but temperament for euro on the basis of declining Greek and other bond spreads is maybe overdone. We would see a prospect of euro heading toward $1.4626, the low of early November, if the U.S. retail sales are strong today, said KBC's Wuyts.
In any event, Nordea's Christensen said investors were reluctant to buy the euro in large amounts following the ratings downgrade for Greece and outlook cut for Spain this week.
Sterling drew some support from the Moody's analysts' comments that while Britain's borrowing and debt levels could threaten its triple-A rating over the next few years, it would not be right away.
The pound was up 0.1 percent against the dollar at $1.6294 and the euro was up 0.1 percent at 90.59 pence. Sterling hit a near eight-week low below $1.62 on Wednesday on concern about Britain's precarious fiscal position.
Moody's said earlier this week it saw no immediate threat to the ratings of the 17 nations it rates triple-A, although they would face a battle next year to manage their debts.
The dollar index, a gauge of its performance against six major currencies, was little changed at 75.95 .DXY.
US CONSUMER IN FOCUS
U.S. retail sales are due at 1330 GMT and the University of Michigan consumer sentiment index for December at 1455 GMT. Both will be watched for clues about the strength of consumer demand.
We expect a return to a 'normal' reaction -- i.e. good U.S. data is good for the dollar. In case of a positive surprise, euro/dollar would therefore continue to ease ahead of the weekend, said FX analysts at Commerzbank in a note to clients.
The dollar jumped last Friday on surprisingly strong U.S. jobs figures, posting its biggest one-day rise against the yen this year.
Chinese industrial output growth in November jumped to its strongest since June 2007, underlining China's brisk recovery.