Although the greenback rose initially against the Japanese yen on bullish market sentiment after U.S. computer chip giant Intel posted strong Q2 earnings and the pair extend the upmove from previous session low of 88.02 to 89.12 in Asia on cross selling in yen due to the strength of Asian stock markets (Nikkei-225 rose strongly by 258 points to 9795.24), the dollar fell sharply in European session on cross buying in yen and tumbled to 88.19 after the release of weaker-than-expected U.S. retail sales data. Later, despite dollar's rebound from 88.19 to 88.62, the pair fell again after the dovish minutes of FOMC's June meeting and hit an intra-day low of 88.06 before recovering.

The minutes of FOMC meeting in June showed that members of the Federal Reserve agreed it would be appropriate to maintain the target range of 0-0.25% for the Fed fund rate. In addition, the members said the central bank should be ready to consider additional steps to boost the U.S. economy if an already softening economic outlook took a noticeable turn for the worse. The Fed also lowered its forecast of 2010 U.S. GDP in +3.0% to +3.5% (previous +3.2% to +3.7%) and expected 2010 unemployment rate in 9.2% to 9.3% (previous 9.1% to 9.5%).

The greenback was pressured by weak U.S. sales data, as U.S. June retail sales dropped by 0.5% versus the economists' forecast of -0.2% and the core retail sales fell by 0.1% against the expectation of no change.

In addition, the International Monetary Fund urged Japan to act soon to reduce its huge public debt using measures including a gradual increase in its consumption tax.

Although the single currency traded narrowly in Asia and Europe and edged lower to 1.2683 after the release of weaker-than-expected eurozone industrial production, the pair pared its early losses and gained to a fresh two-month high of 1.2778 in NY mid-day. Strong U.S. corporate earnings also supported the single currency as investors are prompted to seek high yield currencies and assets. The euro later retreated after the release of FOMC minutes and ended the day at 1.2745.

The eurozone industrial production in May rose by 0.9% m/m and 9.4% y/y versus the economists' forecast of 1.2% m/m and 11.2% y/y respectively.

Although the British pound traded relatively narrowly in Asia and then rose to 1.5291 in European morning on better-than-expected U.K. job data, cable then fell to 1.5204 after the release of weaker-than-expected U.S. retail sales data. Later, renewed buying at 1.5201 lifted the British pound again n sterling rose to a ten-week high of 1.5298 in NY on dollar's broad-based weakness before retreating .

U.K. unemployment rate came in at 7.8% versus the previous 7.9% in May, while U.K. Jobless claimants dropped by 20.8K to the lowest in a year, versus the expectations of 20.0K and 30.9k in May.

In other news, BOE's Sentance said there has been improvement in business situation, more than normal amount of uncertainty and BOE needs to start process of moving interest rate up from extremely low level

Economic data to be released on Thursday include: Japan BOJ rate decision, Machine tools orders, Swiss ZEW index, U.S. Jobless claims, PPI, Empire state mfg, capacity utilisation, Industrial production, Philadelphia Fed survey.