The dollar rallied on Friday on bullish economic data and hit a two-week high against the euro as expectations of central bank stimulus weighed on the single currency. US homebuilding fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but a jump in permits to a seven-month high offered hope for the struggling housing market. Better-than-expected retail sales data in the United States on Thursday also encouraged buying of the dollar.

"Any downturn in the US economy appeared on a further rather than closer horizon after bullish retail spending data this week suggested America's main growth engine had ample horsepower to extend the record-long expansion," said Joe Manimbo, senior market analyst at Western Union Business Solutions. The euro fell 0.14% to $1.1090, shy of the two-year low of $1.1025 it reached on Aug. 1. Friday's fall was caused by growing expectations of an interest rate cut by the European Central Bank after Governing Council member Olli Rehn suggested on Thursday that the central bank could restart its quantitative easing program and was open to extending it into equity purchases.

The biggest move against the dollar was in Norway's crown, which dropped to more than a 17-year low of 9.0375 against the greenback in early Friday trading. Measured against a basket of six other major currencies , the dollar was higher by 0.05% at 98.195. It has recovered by 1.25% from its three-week low on Aug. 9.

Copyright Reuters, 2019