NEW YORK, Sept 17 (Reuters) - The dollar scaled three-week peaks on Friday, supported by better-than-forecast U.S. retail sales data released on Thursday that backed expectations for a reduction of asset purchases by the Federal Reserve before the end of the year. The dollar index, a gauge of the greenback"s value against six major currencies, rose to 93.220, the highest since the third week of August. It was last up 0.4% at 93.207. For the week, the dollar index gained 0.6%, its largest weekly percentage rise since mid-August. The Fed holds a two-day monetary policy meeting next week and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond. read more "While we doubt that the FOMC will set out a plan for tapering its asset purchases, the new economic projections may shed some light on its reaction function given building cyclical inflationary pressures," wrote Jonathan Petersen, markets economist at Capital Economics, in its latest research note. "Our view remains that inflation in the U.S. will stay elevated for longer than the FOMC and investors currently anticipate, in turn supporting higher U.S. yields and a stronger dollar," he added. Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement. read more In afternoon New York trading, the euro slid 0.3% to $1.1729, after hitting a three-week low of $1.1724 earlier in the session. The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys. read more The dollar held gains after the Michigan sentiment report. Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England. The dollar was up 0.5% against the Swiss franc at 0.9320 francs, after earlier hitting a five-month high of 0.9324 francs . The dollar rose 0.2% to 109.92 yen . The yen has shown limited reaction to the ruling Liberal Democratic Party"s leadership race, which formally kicks off on Friday ahead of a Sept. 29 vote. The LDP"s parliamentary dominance means the party"s new leader will become prime minister. read more The dollar also rose to a two-week high against the offshore yuan and was last up 0.3% at 6.4711. The yuan is being pressured by growing worries about China"s real estate sector as investors fear property giant China Evergrande (3333.HK) could default on its coupon payment next week. read more The British pound fell 0.4% to $1.3738 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported. ======================================================== Currency bid prices at 2:59PM (1859 GMT) Description RIC Last U.S. Close Previous Session Pct Change YTD Pct Change High Bid Low Bid Dollar index 93.1820 92.8730 +0.35% 3.557% +93.2200 +92.7600 Euro/Dollar $1.1729 $1.1768 -0.33% -4.00% +$1.1789 +$1.1724 Dollar/Yen 109.9250 109.7500 +0.16% +6.39% +110.0750 +109.6700 Euro/Yen 128.93 129.13 -0.15% +1.58% +129.6600 +128.9200 Dollar/Swiss 0.9323 0.9279 +0.46% +5.36% +0.9324 +0.9261 Sterling/Dollar $1.3737 $1.3792 -0.38% +0.57% +$1.3812 +$1.3736 Dollar/Canadian 1.2742 1.2685 +0.44% +0.05% +1.2762 +1.2638 Aussie/Dollar $0.7273 $0.7295 -0.30% -5.45% +$0.7321 +$0.7266 Euro/Swiss 1.0933 1.0915 +0.16% +1.17% +1.0935 +1.0906 Euro/Sterling 0.8535 0.8528 +0.08% -4.50% +0.8553 +0.8523 NZ Dollar/Dollar $0.7040 $0.7076 -0.53% -1.99% +$0.7086 +$0.7026 Dollar/Norway 8.6910 8.6385 +0.69% +1.29% +8.7075 +8.5925 Euro/Norway 10.1958 10.1410 +0.54% -2.59% +10.2139 +10.1136 Dollar/Sweden 8.6743 8.6210 +0.31% +5.83% +8.6896 +8.6038 Euro/Sweden 10.1750 10.1435 +0.31% +0.98% +10.1965 +10.1370