The dollar was down 0.8 percent at 95.35 yen JPY= while the euro fell 0.1 percent to 136.22 yen EURJPY=R. Sterling rose 0.5 percent to $1.6570 GBP=.

Higher-yielding currencies such as the Australian AUD= and New Zealand NZD= dollars gained more than 1 percent each, extending rises from the previous day.

Analysts said the euro zone forecast was not uniformly sunny, noting the economy of the 16-country zone shrank 4.6 percent from a year ago. It also contracted 0.1 percent in the second quarter after shrinking 2.5 percent in the January-to-March period.

Wilkinson said the euro's failure to push up to $1.4350 mean it may be vulnerable to a pullback on Friday.

None of that dulled investor disappointment with the 0.1 percent slide in U.S .retail sales, especially as it followed the Fed's upbeat assessment and last week's data showing U.S. employers cut fewer jobs than expected in July.

Economists polled by Reuters had expected retail sales to rise 0.7 percent, partly thanks to a boost from the government's "cash for clunkers" program that gives money to swap aging, gas-guzzling cars for new, more efficient ones.link...