The U.S. dollar extended its early rally against the Japanese yen in the European session on Friday, after a data showed that the nation's retail sales increased unexpectedly in June, in an indication of a strengthening of the economy.

Data from the Commerce Department showed that retail sales climbed by 0.6 percent in June after plunging by a revised 1.7 percent in May.

The rebound surprised economists, who had expected retail sales to fall by 0.4 percent compared to the 1.3 percent slump originally reported for the previous month.

Excluding a steep drop in sales by motor vehicle and parts dealers, retail sales jumped by an even stronger 1.3 percent in June following a revised 0.9 percent decrease in May.

Economists had been expecting ex-auto sales to increase by 0.4 percent compared to the 0.7 percent drop originally reported for the previous month.

In an interview with CNBC on Thursday, U.S. Treasury Secretary Janet Yellen warned that a rapid rise in inflation could stall the economic recovery, with elevated housing prices raising worries of a bubble.

High inflation rate could continue for several more months, but that is expected to fall back toward normal levels over the medium term.

The greenback showed mixed performance against its major peers in the Asian session. While it held steady against the euro, it rose against the yen and the franc. Against the pound, it weakened.

The greenback appreciated to an 8-day high of 0.9204 against the franc from Thursday's trading close of 0.9177. The greenback is likely to find resistance around the 0.94 level. The greenback remained firm against the euro, at a 2-day high of 1.1792. The EUR/USD pair had closed Thursday's deals at 1.1811. The greenback is seen finding resistance around the 1.16 region.

Final data from Eurostat showed that Eurozone inflation fell below 2 percent in June, as initially estimated.

Inflation eased to 1.9 percent in June from 2 percent in the prior month. The annual rate came in line with the flash estimate released on June 30.

Continuing its Asian session's advance, the dollar hit a 2-day high of 110.34 against the yen. The pair was worth 109.81 when it ended deals on Thursday. If the greenback rises further, 112 is possibly seen as its next resistance level.

The Bank of Japan decided to maintain its monetary stimulus unchanged and unveiled a preliminary outline for the new programme to support efforts on climate change.

The bank also lowered its near-term growth outlook citing the impact of the coronavirus pandemic and raised its fiscal 2021 inflation forecast.

The greenback held firm against the pound, with the pair trading at 1.3820. The currency had logged a weekly high of 1.3792 at 3:30 am ET. The pound-greenback pair had finished yesterday's trading session at 1.3821. On the upside, 1.345 is likely seen as its next resistance level.

The greenback jumped to 0.7408 against the aussie, a level unseen since December 2020. The aussie-greenback pair was worth 0.7418 at Thursday's close. The greenback is likely to find resistance around the 0.72 level, should it rises further.

The greenback recovered from its Asian session's low of 0.7030 against the kiwi and was worth 0.6995. At yesterday's trading close, the pair was quoted at 0.6977. The greenback is poised to find resistance around the 0.68 level.

Data from Statistics New Zealand showed that New Zealand inflation climbed 3.3 percent on year in the second quarter of 2021 - exceeding expectations for 2.8 percent and up sharply from 1.5 percent in the three months prior.

On a quarterly basis, inflation climbed a seasonally adjusted 1.3 percent - again beating forecasts for 0.8 percent, which would have been unchanged from the first quarter.

The greenback wavered against the loonie and was trading at 1.2585. The greenback was trading at 1.2591 per loonie at yesterday's close.

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