The US dollar and Japanese yen ended the day mostly lower on Thursday after sharp declines during the European trading session, but it was clear that risk appetite in the forex markets was on edge during US trading as US economic data was broadly disappointing.

The US dollar saw a mixed day of trading on Wednesday, gaining against the euro, Swiss franc, and Japanese yen while falling versus the commodity bloc. Based on broad losses for the Japanese yen, the moves signaled slight improvements in risk appetite.

Looking ahead to Wednesday, the concurrent releases of the US import price index, housing starts, and building permits at 8:30 ET could stoke volatility in the forex markets.

After a conspicuously choppy session, the US dollar would finish the week with a modest buffer from major breakout levels.

The US dollar surged across the majors, while the Japanese yen ended the day mixed as equities plunged throughout the day but staged a last minute rebound on reports that the US government would assist homeowners struggling with mortgages.

The US dollar and Japanese yen ended the day mixed versus the majors as equities traded within narrow ranges, signaling indecision in the markets.

The US dollar and Japanese yen rocketed higher on Tuesday due to a jump in risk aversion, a threat that has continued to linger in the markets for months.

greenback ended Monday broadly lower against the majors, as the US dollar index continues its nearly month-long consolidation below the January highs.

The US dollar fell versus most of the majors on Friday as US non-farm payrolls fell in line with expectations by 598,000 in January, while the December reading was revised down another 53,000 to -577,000, indicating that the US economy lost a total of 3.57 million jobs in 2008.

If job losses and the unemployment rate don’t climb quite as much as anticipated, the news could spark enough optimism to boost demand for stocks and forex carry trades, and subsequently lead the dollar and yen lower.