The dollar steadied on Friday after paring losses against the euro in the previous session on a raft of data that showed the U.S. economy may be in better shape than earlier thought. The U.S. currency has been unable to shake off market expectations in the past few months that the slowing economy could force the Federal Reserve to start cutting interest rates next year. The dollar fell on Thursday after Yves Mersch, a member of the European Central Bank Governing Council, said euro zone rates remain low in historical terms, highlighting the risk that the dollar's rate advantage could narrow further. Stronger-than-expected monthly readings for existing home sales, consumer confidence and the Chicago manufacturing index helped the dollar to trim losses against the euro on Thursday. "It is rather puzzling that market participants are not buying the dollar much despite the strong data," said a trader at a big Japanese bank. "Players are staying bearish on the currency," he added. Market activity in Tokyo was subdued on Friday, after many Japanese companies finished this year's business on Thursday, traders said. No major economic indicators are due from Japan or the United States, while Germany's GfK consumer sentiment survey for January will be released at 0700 GMT. Bond and stock markets in Japan were open for a half-day on Friday and will resume trading on Thursday, Jan. 4.