The yen was the biggest winner for a third day in a row as mild carry trade liquidation continued and Japanese Retail trade data printed better than expected. Elsewhere, markets will focus on the Fed's statement, widely expected to keep their interest rates at 5.25 per cent.

GBP
The sterling fell sharply against the robust yen as warnings against one-way bets in currency markets tempered investors' appetite for risk, cutting carry trades exposure. However the pound recovered most losses as UK House prices data showed a rise of 1.1 per cent in June from May and 11.1 per cent from June 2006.

USD
The dollar slipped slightly after weaker than-expected durable goods orders figures. With the Fed's two-day meeting coming to an end, it's almost certain that official interest rates will remain unchanged at 5.25 per cent. While in the last statement, the Fed acknowledged that the economy was weak but the predominant policy concern remains that inflation will fail to moderate as expected, today's main interest will be what the Fed has to say about policy direction.

EUR
The euro remained stuck in a tight trading range and economic data has been light. Overall, the eurozone economy is still performing well enough to warrant another interest rate hike from the ECB next week as members continue to remain hawkish. The CB is closely monitoring upside inflation risks.

JPY
The yen strengthened across the board for a third consecutive day as volatile global stock markets continued concerns about the US subprime mortgage sector prompted investors to close out risky carry trades.

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