The U.S. dollar edged higher in early European trade Friday, adding to the previous session's strong gains, while the Japanese yen gained after the Bank of Japan shifted its monetary policy.

At 03:15 ET (07:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 101.593, after gaining around 0.7% on Thursday.

The dollar surged on Thursday following the release of data showing the U.S. economy grew faster than expected in the second quarter, suggesting a recession is less and less likely in the second half of the year.

USD/JPY fell 0.3% to 139.05, in volatile trade after the Bank of Japan's decision on Friday to conduct its yield curve control policy more flexibly, allowing the 10-year yield to move 0.5% around the 0% target.

The 10-year JGB yield spiked to 0.575% for the first time since September 2014 before easing slightly to 0.547%, while the yen swung between gains of over 1% against the dollar and a 1.2% loss, as traders digested the potential ramifications.

EUR/USD edged higher to 1.0976, after dropping more than 1% on Thursday in the wake of the European Central Bank's meeting.

The ECB raised interest rates again and kept its options open on whether more increases will be needed to bring down inflation, but President Christine Lagarde hinted at a pause in its tightening cycle as soon as September.

Elsewhere, GBP/USD edged lower to 1.2787, after dropping over 1% on Thursday, AUD/USD fell 1.1% to 0.6633 after data showed that Australian retail sales unexpectedly fell in June, while USD/CNY fell 0.2% to 7.1581.

Source : Investing.com