The Japanese yen rose broadly on Thursday on widening credit-market losses and slowing economic growth. The Bank of Japan lowered its assessment of the economy and held interest rates steady at 0.5% on Thursday. Governor Toshihiko Fukui said the central bank will raise borrowing costs gradually as the U.S. economy slows.

The greenback retreated against the Japanese yen from 113.42 to 112.80. Euro and sterling tumbled versus the yen from 163.10 to 161.75 and from 226.62 to 223.64 respectively.

The price gauge that's closely watched by the Fed, excluding energy and food items, rose to 2 percent in the 12 months through November, the fastest since May, discouraging the Federal Reserve from cutting its target lending rate in 2008 after three reductions to 4.25 percent this year. The single currency declined to 1.4310 against the dollar, the weakest level since October.

The British pound fell broadly after a government report showed the current-account deficit widened to a record 20 billion pounds last quarter. Cable tumbled from 1.9985 to 1.9810. Euro rallied to 0.7240 against the sterling.

Canada's dollar appreciated against the dollar on speculation central banks will revive lending among financial institutions, helping the North American economy avoid recession. The greenback fell versus the Canadian dollar from 1.0050 to 0.9954, trading below $1 for the first time in two weeks.

Friday will see the release of eurozone current account, U.K. retail sales, eurozone industrial orders, U.K. Gfk survey, U.S. personal income and spending, and University of Michigan survey.