The green currency advanced against a basket of major currencies on Friday amid expectations the Fed may scale back stimulus at the end of the year after the recent improvement in U.S. data, thereby boosting demand on dollar as it will avoid future glut in markets.   

The U.S. dollar continued its rally successfully after the strong rebounds last week where the dollar index is currently hovering around 10-month high of 84.30 after hitting a high of 84.34 from the session’s low of 83.88.

The six-currency gauge has recorded 1.25% rise last week while set for a second weekly advance of 1.2% this week.   

The dollar took a breather yesterday after a report showing that initial jobless claims climbed to 360,000 in the week ended May 11 from both revised and predicted readings of 328,000 and 330,000.

Yet, it resumed its rally today before the release of leading indicators which may show 0.2 percent last month after dropping 0.1 percent in March, according to median estimates.

Fed Bank of San Francisco President John Williams said on Thursday fast growth and progress in labor market may prompt policymakers cut monthly bond purchases, where next week eyes will follow FOMC minutes which will show the point of view of policy makers during last monetary meeting.   

The latest comments from the Fed pointed that there could be either an increase or decrease in stimulus according to the progress of the economy.

Against the yen, the dollar showed some advance to take the pair to a high of 102.62 while it is currently trading around 102.45, amid speculations the pair is heading to 105, which represents 61.8% Fibonacci Retracement to the downside trend that began in July 2007.

The dollar also pared showed some strength versus the euro as it rose against it for a fourth consecutive session to trade around 1.2820, falling from a high of 1.2888, as data from this week showed worse than expected drop in the euro area’s first quarter GDP.

The EURUSD resumed its bearish direction that started last week after the pair managed to breakout support at 1.2885, which represents weekly SMA 50.

As for the GBPUSD, it pared its advance over the previous two sessions, heading for a second weekly decline, after the pair has found resistance at 1.5268 which pushed it down to touch a low of 1.5191 which remains key support for the pair as it constitutes 23.6% Fibonacci Retracement to the downside trend that started on January 3.

The strong dollar frustrated the sterling’s attempt to benefit from optimistic comments from Governor Mervyn King and rise in growth forecasts. King said recovery is in sight for U.K. economy, revealing that this is first time to predict a "brighter economic outlook" since the financial crisis began, while growth forecasts were raised to 0.5 percent in the second quarter from 0.3 percent in the first three months of the year, according to the BOE inflation report.

Canada’s annual inflation pace dropped to its slowest in over three years in the last month, slipping below the Bank of Canada’s inflation target.

Canada’s consumer price index decreased 0.2 percent in April, after a rise by 0.2 percent in March, while analysts called for a stagnant reading.

The consumer prices index dropped to 0.4 percent annualized pace in April, from 1.0 percent pace in March, and below analysts’ estimates at 0.6 percent rate. That’s the slowest since October 2009, when the country experienced a period of deflation following the recession.

Core CPI, which excludes volatile items like food and energy increased by 0.1 percent in April, after a prior rise by 0.2 percent.

On an annual rate, core CPI dropped to 1.1 percent from 1.4 percent.

Turkish Prime Minister Recep Tayyip Erdogan is meeting the U.S. president Barak Obama at the White House on Friday to discuss the two-year-conflict in Syria.

While the two remain far apart on how to handle Syria`s bloody civil war, the two parts agree that Syrian President Bashar Assad must be ousted.

Erdogan will be calling for the U.S. intervention in Syria`s civil war as the conflict is spilling over the border, threatening the neighboring countries.

The talks come only one day before Russian President Vladimir Putin will meet UN Secretary General Ban Ki-moon to discuss Syria.

Reports have shown that Russia sold advanced Yakhont anti-ship cruise missiles to Bashar Assad to allow him to stop any attempt by international forces to reinforce Syrian rebels.

After their talks and a joint White House press conference, Obama and Erdogan will meet again on a private dinner.

The European Banking Authority (EBA) announced that it has agreed on recommendations to supervisors to conduct asset quality reviews on top EU banks, which will postpone the region`s next round of stress tests until 2014.

A delay, however, would help boost the "credibility of the next EU-wide stress test" of banks and "help dispel concerns over the deterioration of asset quality to macroeconomic conditions in Europe, the EBA said on its website yesterday.

The next round of stress tests should clear the way for the European Central Bank before taking the helms of an underway banking umbrella covering the euro area, as previous stress test failed to diagnose some debt-stricken euro banks.

The asset quality classification and valuation will be conducted by the ECB in the 17-nation euro zone that are joining the new European Banking Union. The ECB will supervise the banks of those countries starting next year.

The national banking regulator will conduct the review in the rest of 10 EU-member states. Meanwhile, the EBA will work some details of bank holdings of sovereign debt, scheduled to be provided in the second half of 2013.

The ECB, a hub harmonizing banking rules across the EU, also said that the actual timing of the asset quality review and next stress tests will be determined once a new law setting up the ECB as banking supervisor is upheld.