The dollar rose by more than 1 percent against the Japanese yen JPY=, touching its highest in more than a week and on pace for its largest daily rise against the yen since July 3. The euro EUR= fell to its lowest against the dollar since July 28.
The strong U.S. data and the "specter of cooler heads prevailing on the geopolitical front" were what pushed the dollar to its highs, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
July's U.S. retail sales data showed the largest gain in the reading since December 2016 and followed June's upwardly revised 0.3 percent gain.
Consumers boosted purchases of motor vehicles as well as discretionary spending, increasing the Commerce Department's reading by 0.6 percent.
"The number showed broad-based strength, it beat forecasts both on the headline and the core and what was also encouraging was how the number for June got revised from the red back into positive territory," Manimbo said.
Currency market strategists also pointed to a general recovery by the dollar after a soggy start to the year. The greenback has fallen nearly 12 percent year-to-date against the euro and is down more than 8 percent against the basket of currencies .DXY used to measure its strength.
The dollar index was last up 0.45 percent at 93.848. It earlier touched its highest level since July 26.
After paring some gains, the dollar remained higher against most major currencies, particularly the Japanese yen JPY=. The dollar was flat against the Swiss franc after rising more than 1 percent CHF= on Monday.
Those two currencies surged last week as Washington and Pyongyang ramped up military threats following the imposition of new sanctions on North Korea through the United Nations.
Sterling also slumped after UK inflation numbers came in marginally below forecast, pushing the pound through key support levels against both the euro and dollar. The pound was 0.75 percent lower against the dollar at $1.2863.
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