Stimulus measures, such as the Fed's monthly USD85 billion bond-buying program, weaken the greenback by flooding the economy full of liquidity to keep interest rates low and encourage investing and hiring.
Weak indicators released in the U.S. earlier had markets betting that such policies will stay in place possibly into next year to keep the economy going before it can stand on its own.
In Asian trading on Friday, EUR/USD was down 0.10% at 1.2870.
The dollar gained steam after Federal Reserve Bank of San Francisco President John Williams suggested that despite disappointing economic indicators in the U.S., monetary authorities may begin to scale back stimulus policies later this year.
Philadelphia Fed President Charles Plosser, a known inflation hawk, added separately that the Fed should even consider scaling back the programs next month.
Such comments gave the dollar a boost after weak economic indicators softened the greenback prior.
The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April.
Analysts were expecting the index to improve to a reading of 2.4 in May.
The Department of Labor said earlier Thursday that the number of individuals filing for initial unemployment assistance in the U.S. rose by 32,000 to 360,000 last week, well above expectations for an increase of 2,000 to 330,000.
Soft inflation data took the steam out of the dollar before Williams and Plosser spoke and bolstered the greenback.
The country's consumer price index fell 0.4% in April from March, worse than expectations for a 0.2% decline, down for the second consecutive month.
Year-on-year inflation rates in the U.S. came to 1.1%, just shy of market expectations for a 1.3% reading and well below the Federal Reserve's 2% target.
Meanwhile in the housing sector, the Commerce Department said the number of building permits issued in the U.S. rose 14.3% to 1.017 million units in April, well above expectations for a 6.2% increase to 945,000 units.
U.S. housing starts fell by 16.5% last month to 853,000 units, outpacing expectations for a decline of 4.9% to 973,000.
Thursday's data came in wake of soft industrial output and producer-price reports released on Wednesday.
The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.11% at 1.5252.
The dollar was up against the yen, with USD/JPY up 0.07% at 102.33, and up against the Swiss franc, with USD/CHF trading up 0.14% at 0.9662.
In Japan earlier, the Economic and Social Research Institute said that Japan’s core machinery orders rose 14.2% in March, the largest monthly pickup in eight years.
Analysts had expected Japan’s core machinery orders to rise 2.8% in March, and the surprise curbed the yen's losses against the dollar.
The dollar was up against its cousins in Canada, Australia and New Zealand, mainly on fears cheaper commodities will cut into growth, with USD/CAD up 0.16% at 1.0208, AUD/USD down 0.40% at 0.9768 and NZD/USD trading down 0.62% at 0.8104.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.10% at 83.98.