The U.S. dollar was trading broadly mixed against the major foreign currencies. It is consolidating Wednesday's intervention-inspired losses against the Japanese yen. There was no clear sign of intervention Thursday and the greenback has been confined to around a quarter-yen range on either side of JPY85.50.

The euro is extending its recent gains, with the help of good buying on the crosses, and has overcome the offers near $1.3050. Although intraday technical indicators are overextended, we suspect a more pronounced shift of buying euro weakness rather than selling into strength ahead of next week's Federal Open Market Committee meeting. Sterling is underperforming following the disappointing retail sales (down 0.5% vs. consensus of a rise of 0.3%). The better-offered dollar may conceal the extent of sterling's weakness, but watch its performance against the euro. A convincing break of GBP0.8400 may be significant.

Asian stocks forfeited most of the their gains as investors calmed down after the government intervention of the yen. The benchmark Nikkei 225 lost 0.07% from Wednesday, failing to sustain the one-month closing high logged the previous day. In addition, concerns about a curb in banking lending and loan growth in China weighed on Asian stocks. The Hang Seng Index, for example, was down 34 points, or 0.16%. More specifically, there was a sharp selloff in mining, financial and utility stocks.

Overall, the uncertainty of the effectiveness of the yen intervention, coupled with a contractionary policy response in China and India, has stoked investors fears about sustained growth.
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