The greenback rallied to a one-month high of 108.38 against the Japanese yen after U.S. retail sales unexpectedly rose last month, easing concern that U.S. economy will slide into a recession and hurt global growth.

U.S. retail sales came in at an increase of 0.3% in January (forecast was a drop of 0.3%), after falling 0.4% in December. The single currency fell briefly from to 1.4600 to 1.4530 and then rebounded to close at 1.4574 on active cross buying in euro especially versus the Japanese yen on the hawkish comments from ECB's Garganas who said the outlook for eurozone inflation has worsened since late last year as inflation hit a record high of 3.2% in January. Euro rallied against the jpy from 155.83 to 157.89.

The British pound rose from 1.9550 to 1.9666 on Wednesday due to active cross buying in sterling versus euro and the Japanese yen after the Bank of England said in a quarterly inflation report that it would overshoot its 2% inflation target if it cuts rates too quickly. Euro weakened against the sterling from 0.7450 to 0.7414 and sterling rallied versus the Japanese yen from 209.43 to 212.79.

The Australian dollar tumbled against U.S. currency from 0.9047 to 0.8923 on growth worry as the Westpac-Melbourne Institute consumer sentiment index fell 5.5% in February to 97.4, on top of an 8.3% drop in January. The index was 12.6% lower than in February last year and 15.5% below its 2007 average. The New Zealand dollar also fell versus the greenback from 0.7909 to 0.7815.

Thursday will see the release of Japan’s GDP, industrial production and capacity utilization, German and eurozone GDP respectively, U.S. jobless claims and trade balance.