The U.S. dollar strengthened against its major counterparts in the European session on Friday, as encouraging U.S. reports on housing starts, building permits and import prices for January underscored expectations that the Federal Reserve will hike interest rates in March.

Data from the Commerce Department showed that U.S. housing starts rebounded much more than anticipated in the month of January.

The Commerce Department said housing starts soared by 9.7 percent to an annual rate of 1.326 million in January after tumbling by 6.9 percent to a revised 1.209 million in December.

Economists had expected housing starts to climb by 3.5 percent to an annual rate of 1.234 million.

Building permits, an indicator of future housing demand, also surged up by 7.4 percent to an annual rate of 1.396 million in January from the revised December rate of 1.300 million.

The Labor Department report showed that U.S. import prices jumped more than expected January, while export price growth also exceeded estimates.

The Labor Department said import prices surged up by 1.0 percent in January after edging up by a revised 0.2 percent in December.

Economists had expected import prices to climb by 0.6 percent.

The report also said export prices increased by 0.8 percent in January after inching up by a revised 0.1 percent in December.

Export prices had been expected to rise by 0.3 percent.

The currency was trading in a negative territory in the Asian session.

The greenback advanced to 0.7924 against the aussie, 0.7386 against the kiwi and 1.2532 against the loonie, reversing from its early 2-week low of 0.7988, 6-1/2-month low of 0.7437 and an 11-day low of 1.2451, respectively. The next possible resistance for the greenback is seen around 0.77 against the aussie, 0.72 against the kiwi and 1.28 against the loonie.

The greenback firmed to 0.9249 against the franc, from near a 3-year low of 0.9188 hit at 4:30 am ET. On the upside, 0.95 is likely seen as the next resistance for the greenback.

The greenback rose to 1.4005 against the pound, after having fallen to an 11-day low of 1.4145 at 11:45 pm ET. The greenback is seen finding resistance around the 1.38 level.

Figures from the Office for National Statistics revealed that UK retail sales grew less than expected in January.

Retail sales rose 0.1 percent month-on-month in January, reversing a 1.4 percent drop in December. Economists had forecast a 0.5 percent rise.

The greenback hit a 2-day high of 1.2430 against the euro, off its early more than a 3-year low of 1.2555. Further uptrend for the greenback is likely to see it finding resistance around the 1.23 mark.

Data from Destatis showed that Germany's wholesale price inflation accelerated slightly in January, after easing in the previous three months.

Wholesale prices climbed 2.0 percent year-over-year in January, faster than the 1.8 percent rise in December.

The greenback was trading in a positive territory against the yen with the pair trading at 106.23. This may be compared to a 15-1/2-month low of 105.55 hit at 11:15 pm ET. If the greenback extends rise, 108.00 is seen as its next resistance level.

The University of Michigan's preliminary consumer sentiment for February is due at 10:00 am ET.

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