The U.S. dollar dropped against its most major counterparts in the European session on Thursday, as investors weighed the likelihood of a government shutdown in the United States on Friday.

The federal government faces the threat of a shut down tomorrow, as Republican leaders scramble to get enough votes to push for a stopgap funding bill amid immigration and military spending issues.

With Democrats pushing hard to provide a solution for protecting the Deferred Action for Childhood Arrivals program, it is unclear whether the U.S. Congress have enough votes to pass the spending bill.

A House vote is planned to take place later in the day.

The U.S. jobless claims and housing starts data will be released at 8:30 am ET.

The greenback was higher against its most major opponents in the Asian session on stronger-than-expected U.S. economic data.

The greenback dropped to 1.3890 against the pound, from a high of 1.3805 hit at 2:15 am ET. If the greenback falls further, 1.44 is likely seen as its next support level.

Pulling away from an early 3-day high of 0.9667 against the franc, the greenback weakened to 0.9592. Continuation of the greenback's downtrend may see it challenging support around the 0.94 mark.

The greenback reversed from an early 6-day high of 1.2165 against the euro, falling to 1.2252. On the downside, 1.26 is possibly seen as the next support for the greenback.

The greenback dropped to 0.7304 against the kiwi, off its early high of 0.7246. The next possible support for the greenback is seen around the 0.75 region.

Data from the Real Estate Institute of New Zealand showed that New Zealand's house prices increased in December from a year ago, while the volume of sales decreased notably.

The national median house price index climbed 5.8 percent year-over-year to NZ$550,000 in December. Median prices increased 1.9 percent, month-on-month.

The greenback fell back to 1.2432 against the loonie and held steady thereafter.

The greenback eased to 0.7998 against the aussie, from an early high of 0.7942. The greenback is seen finding support around the 0.82 mark.

Data from the Australian Bureau of Statistics showed that Australia's unemployment rate rose a seasonally adjusted 5.5 percent in December.

That was above forecasts for 5.4 percent, which would have been unchanged from November.

The greenback held steady against the yen, after easing from a 6-day high of 111.48 hit at 10:45 pm ET. The pair closed Wednesday's deals at 111.26.

Figures from the Ministry of Economy, Trade and Industry showed that Japan's industrial production increased less than initially estimated in November.

Industrial production rose at a stable rate of 0.5 percent month-over-month in November, just below the 0.6 percent increase reported earlier.

Looking ahead, U.S. building permits and housing starts for December and weekly jobless claims for the week ended January 13 are set for release in New York session.

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