The greenback dropped against the Japanese yen on Tuesday, as minutes from U.S. Fed policy meeting on August 10 showed the officials worried about the growth of U.S. economy.

Although the greenback remained under pressure versus the Japanese yen in Asia and fell from 84.66 to 84.06 due to cross buying in yen together with the weakness in Asian equities (Nikkei-225 tumbled by 3.55%), dollar staged a rebound to 84.55 on short-covering in Europe. Dollar rose further to 84.61 after the release of U.S. consumer confidence data, which came in at 53.5, much stronger than the economists' forecast of 50.5, however, the greenback tumbled from there and reached an intra-day low of 83.83 after the release of U.S. Federal Reserve meeting minutes.

U.S. Fed released minutes of its FOMC meeting on Aug 10 and it stated that the committee would need to consider steps it could take to provide additional policy stimulus if the economic outlook would weaken appreciably further. Members generally believed that outlook would be softer than expected and saw growing downside risks to growth and inflation. The minutes pressured the greenback as some officials were concerned over the U.S. economy.

Earlier in Asia, Japanese Finance Minister Noda said that 'he would take decisive steps on currencies when needed.' He added 'current moves in currencies are one-sided' and he believed government and BOJ policy steps would have an effect from now on.

The Nikkei reported Monday's BOJ's additional monetary easing drew mixed reactions from business leaders. Nobuyuki Nakahara, former central bank policy board member said BOJ's decision to expand a bank-loan program was 'too little and too late as a means of halting the yen's advance.' Japanese MOF's Ikeda suggested BOJ should adopt inflation targeting and would take decisive steps against rapid currencies moves.

Although the single currency weakened in Asia on renewed risk aversions together with cross selling of euro versus yen and the Swiss franc (eur/chf tumbled to a fresh record low of 1.2850) and fell to an intra-day low of 1.2625, euro rebounded from there on short-covering and cross buying in euro after the release of better-than-expected German jobs data, as German unemployment change for August was -17,000 versus the economists' forecast of -20,000 and German unemployment rate remained unchanged at 7.6% as expected. Later, despite euro's sharp rise to 1.2744 in NY, euro fell sharply from there in NY afternoon after the release of U.S. Fed minutes and before staging a recovery.

On economic front, European Union statistics office Eurostat said inflation in the 16-nation currency area fell to 1.6% y/y in August from 1.7% y/y in July. Eurozone unemployment came in at 10.0% as widely expected.

The British pound traded narrowly in Asia after Monday's selloff from 1.5577 to 1.5456. Later, the pair fell from the Asian high of 1.5475 and reached 1.5395 in Europe on dollar's strength against European currencies together with concerns over U.K. housing as the reports from Financial Times showed that the National House Federation estimated tens of thousands of UK homeowners faced at least 4 more years of negative equity. Later, cable dropped again after recovery and tumbled to an intra-day low of 1.5327 in NY.

In addition, European stock markets (DAX, FTSE-100 and CAC-40 pared all of their early losses and closed the day up by 0.45%, 0.11% and 0.22% respectively.

In other news, UK Telegraph reported the British Chamber of Commerce (BCC) said recent weakness in sterling helped British manufacturing sector chalk up its strongest performance against UK services in recent memory. Manufacturing has been doing better than services for the last 3 quarters and the BCC's chief economist David Kern added 'the exchange rate effect has been powerful.'

Economic data to be released on Wednesday include: Australia GDP , Swiss PMI, Germany Retail sales, Manufacturing PMI, EU PMI manufacturing, U.K. PMI manufacturing, Halifax hse prices, U.S. ADP employment, ISM manufacturing, Construction spending.