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The greenback fell against the Japanese yen on Thursday, dragged down by disappointing news in the U.S. housing sector and tumbling in U.S. stock markets. However, the greenback was slightly higher against the euro, which came under pressure as soft data cooled expectations of higher euro-zone interest rates.

The pace of U.S. existing home sales fell in June to a 4.86 million-unit annual rate, the National Association of Realtors said, lower than the forecast of 4.93million. In addition, the initial jobless claims in U.S. also came out worse than expectation and rose to 406K versus the forecast of 376K and 366K the previous week. The Dow Jones Industrial average index tumbled on Thursday and ended down 283 points at 11,349. These altogether had put pressure on the greenback and the dollar dropped to a session low at 107.19 versus the Japanese yen, from a one-month peak at 107.99 set earlier in the day. However, the euro did not take advantage on the weakness in greenback as the worse-than-expected German Ifo business climate report put pressure on the single currency, which came out at 97.5 versus the previous month of 101.3, the lowest since September 2005. The euro fell to an intra-day low of 1.5628 in New York afternoon before stabilising. The decline in U.S. stock markets prompted investors to pare holdings of higher- yielding assets financed by loans in Japan and the euro fell sharply against the Japanese yen to 167.93, 1.2 percent from its record high at 169.97 set on Wednesday.

Sterling was the biggest mover among major currencies on Thursday, which fell sharply against the euro and dollar to as low at 0.7907 and 1.9817 respectively after the release of 3.9 percent fall in June UK retail sales. The New Zealand dollar also dropped earlier to 0.7387 versus the dollar after the Reserve Bank of New Zealand cut its cash rate by a quarter percentage point to 8 percent.

Traders pared bets the ECB will increase interest rates for a second time this year, with the implied yield on the December Euribor futures contract falling 11 basis points, or 0.11 percentage point, to 5.10 percent. The Frankfurt-based central bank raised its main refinancing rate to 4.25 percent on July 3. On the other side, futures traded on the CBOT showed a 40 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by at least a quarter- percentage point by Sept. 16, up from 34 percent odds a week ago. Policy makers next meet Aug. 5.

On Friday, economic data releases include Japan National CPI, Tokyo CPI and CSPI, U.K. GDP data, U.S. Durable goods orders data, University of Michigan Confidence and New home sales.

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