Investing.com - The dollar rallied over 1% against a basket of other major currencies on Friday, hovering close to four-year highs as the release of upbeat U.S. data fuelled further optimism over the health of the U.S. economy.
The dollar strengthened further after the University of Michigan said in a preliminary report that its consumer sentiment index rose to a seven-year high of 86.9 this month from 86.4 in September. Analysts had expected the index to remain unchanged.
In addition, data showed that the Chicago purchasing managers' index rose to a three-and-a-half year high of 66.2 in October from 60.5 in September, confounding expectations for a reading of 60.0.
The reports overshadowed earlier data showing that personal spending fell 0.2% last month, disappointing expectations for a 0.1% rise, after an increase of 0.5% in August.
U.S. personal income rose 0.2% in September, less than the expected 0.3% gain, after a 0.3% advance the previous month.
The U.S. dollar index, which tracks the performance of the greenback against a basket of six major currencies, rallied 1.04% to 87.15, the highest level since June 2010.
The yen hit fresh seven-year lows against the dollar, with USD/JPY up 2.83% at 112.30 after the Bank of Japan surprised markets by unexpectedly introducing further easing measures.
The yen came under broad selling pressure after the BOJ said it would raise its monetary base target to an annual increase of ¥80 trillion from ¥60-70 trillion in order to increase the chances of approaching its inflation goal.
EUR/USD hit 26-month lows at 1.2509, down 0.82% for the day.
Official data showed that euro zone consumer price inflation rose at an annualized rate of 0.4% this month, in line with expectations, up from 0.3% in September.
The rate has now been below 1% for 13 straight months, well under the European Central Bank's target of near but just under 2%.
Core CPI, which excludes food, energy, alcohol, and tobacco, rose at an annualized rate of 0.7% in October, down from 0.8% from the previous month and compared to expectations for a reading of 0.8%.
A separate report showed that the euro zone's unemployment rate remained unchanged at 11.5% last month, as markets had anticipated.
Earlier Friday, official data showed that German retail sales dropped 3.2% last month, compared to expectations for a 1.0% fall. August's figure was revised to a 1.5% increase from a previously estimated 2.5% rise.
The pound and the Swiss franc slid lower, with GBP/USD slipping 0.17% to 1.5973 and with USD/CHF gaining 0.86% to trade at 0.9642.
Elsewhere, the commodity linked dollars were broadly weaker, with AUD/USD retreating 0.57% to 0.8783 and NZD/USD declining 0.66% to 0.7794, while USD/CAD rallied 1.05% to 1.1305.
The loonie weakened after Statistics Canada reported that the country's gross domestic product retreated 0.1% in September, compared to expectations for stagnation. In August, Canada's growth rate was flat.