During U.S. morning trade, the dollar extended gains against the yen, with USD/JPY advancing 1.32% to 98.17.
The Commerce Department said core retail sales, which exclude automobile sales, rose at the fastest pace in seven months, climbing 0.5% compared to forecasts for a 0.4% gain.
Overall retail sales rose by a seasonally adjusted 0.2% last month, slightly below expectations for a 0.3% increase. Retail sales figures for June were revised up to a 0.6% gain from a previously reported increase of 0.4% the report said.
The data reinforced the view that the economic recovery is strong enough for the Federal Reserve to begin phasing out its asset purchase program later this year.
The yen weakened across the board earlier Tuesday following reports that Japan’s Prime Minister Shinzo Abe is looking at lowering the corporate tax rate as a way to offset a planned increase in sales tax.
Elsewhere, the dollar hit one-week highs against the euro, with EUR/USD down 0.45% to 1.3240.
The euro briefly touched session highs earlier after a report showed that the closely watched ZEW index of German economic sentiment rose to a five-month high of 42.0 in August from July’s reading of 36.3. Economists had forecast a reading of 40.0.
The index of economic expectations for the euro zone was also higher, increasing to 44.0, the highest since April 2010, up from 32.8 in July.
The dollar was almost unchanged against sterling, with GBP/USD dipping 0.01% to 1.5462.
Official data on Tuesday showed that the rate of consumer inflation in the U.K. eased in line with forecasts in July. The Office for National Statistics said consumer price inflation ticked down to 2.8% on a year-over-year basis from 2.9% in June.
Investors were looking ahead to U.K. employment data on Wednesday after the Bank of England announced plans last week to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.
The dollar extended gains against the Swiss franc, with USD/CHF jumping 0.92% to 0.9344.
The greenback was broadly higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD down 0.72% to 0.9082, NZD/USD dropping 0.90% to trade at 0.7937 and USD/CAD climbing 0.41% to 1.0346.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.59% to 81.90.