The Australian dollar weakened on Thursday after a private survey showed slightly lower expectations of inflation after the government moved to repeal a tax on carbon.

USD/JPY traded at 102.60, up 0.17%, while AUD/USD traded at 0.9297, down 0.09% after the survey on inflation expectations.

New Zealand's second quarter retail trade rose 1.2%, above expectations for a 1.0% gain.

NZD/USD traded at 0.8464, up 0.8%, after the data.

In Japan, June machinery orders rose 8.8%, well below the expected 15.3% gain on month, with the government downgrading demand prospects, despite thefirst rise in three months.

In Australia, August MI inflation expectations for the trimmed mean came in at 2.6% from 2.7% in July, showing the repeal of carbon prices.

Overnight, the dollar took back earlier losses sustained against most major currencies after investors felt the U.S. currency fell too far on soft U.S. retail sales data.

Core retail sales, which exclude auto sales, rose just 0.1% in July, below expectations for a 0.4% gain.

The numbers softened the dollar by reminding investors that the Federal Reserve won't rush to raise interest rates after it closes its monthly bond-buying program, which is seen taking place in October.

Bottom fishers chipped away at earlier losses, as investors felt the currency was oversold especially in light of weak U.K. and European data.

Eurostat, the European Union's statistical office, reported earlier that industrial output in the euro area contracted 0.3% in June. It was the second consecutive monthly decline and confounded expectations for a 0.3% expansion.

The report came one day after data showed that German economic sentiment deteriorated sharply this month, falling to a 20 month low, largely due to geopolitical tensions.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.06% at 81.72.

On Thursday, the U.S. is to release its weekly report on initial jobless claims.

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