The greenback took a hit on the day as hawkish comments by both European and Japanese policy officials bolstered moves in the respective underlying currencies.  Additionally, with the Bank of England keeping rates steady at 4.5 percent, there was little for dollar bulls to ride on with most action being a retracement to yesterday's rise.  On the economic front, Japanese machine orders rose 4.8 percent on the monthly comparison, reversing the 10 percent decline seen in the previous month.  Although regarded as a rather volatile component, the increase lends to further belief of higher productivity in the world's second largest economy.  Both current and outlook Eco Watchers surveys additionally added to optimism as current month prints were above earlier figures with the exception of a slight dip in outlook results.  Comparatively, euro zone data showed some similar optimism.  According to the Economics Ministry, industrial production in the German region rose almost double prior estimates.  Expected to bounce 0.5 percent higher, the figure jumped 1.1 percent on the monthly figure as the previous month was revised higher to 1.5 percent.  This now places the yearly figure at 3.8 percent, garnering some inflationary precautions by Chief Economist Otmar Issing.  Further dollar weakness was seen domestically as initial jobless claims rose on the week.  Up 7,000 to 327,000, the figure is higher than anticipated by regarded as overstated as hurricane related claims contributed heavily.

Stocks on the other hand were slightly higher going into midday in light of a cautious outlook on housing sector developments by Toll Brothers Inc.  The homebuilder stated disappointing forecasts for next year's earnings and remained unsure of results heading into 2007.  Comparatively, forecasts by Texas Instruments Inc. and Xilinx Inc. suggested healthy technology spending, prompting anticipation of Intel's mid-quarter update.  The Dow Jones industrial average was higher by 19.62 points to 10,830.53 while the broader S&P 500 bounced 4.55 points to 1,261.92.  Notably, Costco Wholesale Corp. reported quarterly profit that rose 12 percent to match estimates on a rise in overall sales.  Sales at establishments opened at least a year rose 9 percent.  Shares of the wholesaler dropped 92 cents to $48.43.

Bonds reversed yesterday's action with some incremental buying in the morning.  The 10-year benchmark note rose $2.50 per $1,000 face value to 100 5/32 as the yield dipped 2 basis points to 4.49 percent.

Richard Lee is a Currency Strategist at FXCM.