During U.S. morning trade, the dollar was close to session highs against the yen, with USD/JPY up 1.65% to 98.03.
The Federal Reserve Bank of Philadelphia said that its manufacturing index rose to 12.5 in June from minus 5.2 in May, outstripping expectations for a reading of minus 2.0.
A separate report showed that U.S. existing home sales climbed 4.2% to a seasonally adjusted 5.18 million units in May from April’s total of 4.97 million, and well above expectations for a 0.6% increase.
Earlier Thursday, the Department of Labor said the number of individuals filing for initial jobless benefits in the U.S. last week rose by 18,000 to a seasonally adjusted 354,000, compared to expectations for an increase of 4,000 to 340,000.
The dollar strengthened across the board after the Federal Reserve said Wednesday it could start scaling back its bond buying program by the end of the year.
Fed Chairman Ben Bernanke said the bank could begin tapering its USD85 billion-a-month asset purchase program later this year and wind it down completely by the middle of 2014 if the economy picks up as the central bank expects.
The bank said it expects the U.S. economy to grow between 2.3% and 2.6% in 2013. The Fed also said it expects the unemployment rate to fall to between 6.5% and 6.8% by the end of 2014 and inflation to edge closer to its 2% target.
The dollar rose to session highs against the euro, with EUR/USD dropping 0.84% to 1.3187.
Earlier Thursday, data showed that manufacturing activity in Germany contracted more than expected in June.
Germany’s manufacturing purchasing managers’ index fell to 48.7 in June compared to expectations for a reading of 49.8 and down from a final reading of 49.4 in May.
The euro zone manufacturing PMI rose to 48.7 in June from a final reading of 48.3 in May, but remained well below the 50 level that separates contraction from expansion.
The bloc’s services PMI rose to a 15-month high of 48.6 from 47.2 in May, above expectations for an increase to 47.5.
Elsewhere, the greenback was slightly higher against the pound, with GBP/USD down 0.12% to 1.5465.
The pound was boosted after official data showed that U.K. retail sales climbed 2.1% in May, outstripping expectations for a gain of 0.8% and were 1.9% higher from a year earlier.
The dollar was also higher against the Swiss franc, with USD/CHF climbing 0.20% to 0.9300.
The Swiss National Bank kept its benchmark interest rate unchanged at zero on Thursday and said the Swiss franc remains “high”.
The bank also maintained the minimum exchange rate floor at 1.20 per euro saying the measure is “important in order to avoid an undesirable tightening of monetary conditions.”
The greenback posted sharp gains against its Australian, New Zealand and Canadian counterparts, with AUD/USD down 1.11% to 0.9187, NZD/USD tumbling 2.14% to 0.7727 and USD/CAD advancing 0.83% to 1.0356.
The New Zealand dollar came under heavy selling pressure earlier Thursday after official data showed that the economy expanded 0.3% in the first quarter, undershooting expectations for a 0.6% increase.
Meanwhile, data on Thursday showed that China’s HSBC preliminary manufacturing PMI fell to a nine month low of 48.3 in June from 49.2 in May as new orders fell, indicating that the slowdown in manufacturing is worsening.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.89% to 82.18.