In emerging markets, Turkey's lira was flirting with a collapse through 11 per dollar. The currency has slumped more than 25% this year as inflation has soared to 20% and pressure from the country's President Tayyip Erdogan in recent days has stoked expectations the central bank will slash interest rates by at least another 100 basis points at 1100 GMT.
"The main thing that drives the lira these days is what President Erdogan says and it feels like recently that he has just decided to let it go," said Vladimir Demishev a senior interest rates trader at Sova Capital, adding his view of what would happen with rates later had been changing all week.
S&P 500 futures meanwhile were up 0.3% after the index eased on Wednesday after retail giant Target had been the latest to warn that three-decade high U.S. inflation was putting pressure on profit margins.
"We do seem to have stalled somewhat as we head into the year end," said Jun Bei Liu, a portfolio manager at Tribeca Investment Partners in Sydney.
"Investors perhaps are just taking a bit of pause," she said, in the wake of a strong U.S. results season, but as inflation and China's slowdown loom as macroeconomic headwinds.
In Asia overnight, Japan's Nikkei ended down 0.3%. MSCI's broadest index of Asian shares outside Japandropped 0.5%, dragged mostly by weakness in Hong Kong tech stocks as Chinese heavyweight Alibaba fell over 5% 9988.
Ant Group and SoftBank-backed payments firm Paytm also copped a drubbing on debut in India, with shares falling 21% below the listing price in their first session.
Meanwhile, safe-haven assets hung on to most of Wednesday's decent gains. The yen, which posted its sharpest one-day slump in three months a day ago, hovered at 114.18 per dollar as the greenback's rally paused.
Gold sat steady at $1,864 an ounce. GOL/ Benchmark 10-year Treasury yields also held at 1.5906% after falling about 5.5 basis points on Wednesday. US/ Germany’s 10-year yield, the benchmark of Europe, was down 2 basis points at -0.26% but the inflation pressure was still showing.
The inflation linked 10-year Bund yield was just off a fresh record low - yields move inverse to price - and the closely-followed five-year, five-year forward inflation gauge hovered just under 2%.
Hinting at division among European Central Bank policymakers, board member Isabel Schnabel had said on Wednesday that the central bank must be ready to rein in inflation if it proves to be more stubborn than expected.
Against the backdrop of apparent caution is a surging U.S. dollar, as U.S. data has turned surprisingly strong just as doubts have arisen over the outlook for other major economies.
By contrast, Europe is grappling with a wave of COVID-19 cases and fresh restrictions to curb it, while the central bank is pushing back on pressure to raise rates.
The euro recovered from a trip below $1.13 but remained shaky on Thursday at $1.1317. It is also on course for its worst month versus the dollar since June when the Federal Reserve surprised investors with a hawkish shift in tone.
Currency traders are also assessing a sharp downdraft in the Aussie/yen cross, often a barometer of sentiment. It fell through its 200-day moving average on Tuesday and has lost almost 4% in a dozen sessions.
"You've got the perfect storm there for bears," said Matt Simpson, senior analyst at brokerage City Index. "Fundamentally and technically Aussie/yen looks pretty good with lower oil prices."
(Reporting by Tom Westbrook in Sydney Editing by Shri Navaratnam and Sam Holmes) ((firstname.lastname@example.org; +65 6973 8284;))