By Daniel Kruger 

The dollar fell Friday as strong economic data from the eurozone turned the attention of investors toward the prospect of tighter monetary policy for the region.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.2% to 85.45, amid losses against the euro. The dollar after slipped less than 0.1% Thursday.

European manufacturers had their strongest output gains since April 2011, while services also gained, according to preliminary Purchasing Managers index data compiled by IHS Markit.

"The issue of the eurozone economy picking up relative to the U.S. is compelling," said Shaun Osborne, a currency strategist at Scotiabank in Toronto.

The euro was recently up 0.2% against the dollar at $1.1963.

While the Federal Reserve indicated it is on track raise rates again this year and announced a schedule for reducing its $4.2 trillion of bonds accumulated in the wake of the financial crisis, the prospect of a turn away from stimulus by the European Central Bank remains more attractive to investors. The ECB is currently buying EUR60 billion a month in bonds.

Expectations for higher interest rates make assets denominated in that currency more attractive to yield-seeking investors.

Markets are now pricing in a roughly 78% chance that the Fed will raise rates again this year, up from 53% a week ago, according to CME Group data.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

(END) Dow Jones Newswires

September 22, 2017 12:26 ET (16:26 GMT)