By Joseph Adinolfi, MarketWatch

NEW YORK (MarketWatch)--The dollar finished August higher against the euro, yen and British pound Friday, buttressed by strong U.S. economic data and the growing threat of war between Russia and Ukraine.

Investors consider the dollar and the yen to be haven currencies, and buy those assets during periods of turmoil. U.S. economic data shows that U.S. consumers and businesses are spending more, while data in Japan show an economy struggling to overcome the effects of an April 1 sales-tax increase.

"The dollar is the only game in town being supported by strengthening economic data," said Michael Woolfolk, global markets strategist at BNY Mellon.

Economic data released Friday had an outsize effect on the markets, as new conflict in Ukraine appeared to already have been priced into foreign-exchange and bond markets. That was evidenced by the historic weakness of the 10-year German bund yield, the preferred safe-haven asset in the euro zone region, which reached a historic low Thursday, Woolfolk said.

The conflict between Ukraine and Russia intensified Thursday as Ukrainian Prime Minister Petro Poroshenko accused Russia of invading his nation.

The ICE U.S. Dollar Index (DXY), a measure of the dollar's strength against six rival currencies, was at 82.7210 Friday, compared with 82.4770 Thursday evening and 81.30 Aug. 1.

A gauge of U.S. consumer sentiment released Friday rose in August, reversing a drop in July.

The dollar (USDJPY) rose slightly to 103.86 yen from Yen103.68 Friday and Yen102.59 Aug. 1. Inflation data released Friday showed growth below the Bank of Japan's 2% goal. The nationwide core consumer-price index signaled that consumers remain unwilling to spend and companies continue to grapple with tepid demand and high inventories.

Industrial output in Japan increased by a 0.2% in July, much lower than the 1.2% forecast. The reading came after a sharp 3.4% drop in June. Meanwhile, retail sales rose 0.5% in July from a year ago, the first year-over-year rise since the country's April 1 tax increase. But economists said it was a weak rebound.

In Europe, inflation slowed to its lowest rate in five years. The question remains whether the reading was weak enough to push the European Central Bank into new easing measures at its policy-setting meeting next week, but it did drive the euro slightly lower.

The euro (EURUSD) traded at $1.3170 Friday, compared with a close of $1.3185 Thursday evening and $1.34 on Aug. 1.

The pound (GBPUSD) rose against the dollar Friday, trading at $1.6597, compared with $1.6592 late Thursday. It traded at $1.68 Aug. 1.

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