One day after financial markets applauded Brazil's proposed package of budget cuts and tax increases, dealers expressed concern about whether the $84 billion austerity plan will be approved by Brazil's Congress.

The plan is viewed as a key element to securing an expected $30-billion international aid programme, which analysts said would be vital to preventing new market turmoil.

Brazil's stock market tumbled 4.2 per cent on Thursday and the nation lost more than $1 billion through its foreign exchange markets on Wednesday, marking the worst one-day loss since September 11.

News of solid pay gains for US workers in the third quarter stirred some concerns about inflationary pressures in the economy.

"The only news the market received was mixed for the dollar," Henry Will more, senior economist atBarclays Capital, said, explaining the Labour department's Employment Cost Index "was slightly negative because it showed more inflation risk for the economy which is not good for the currency."

The dollar slipped to 1.6535 German marks from 1.6570 marks on Wednesday and fell nearly a full Japanese yen to 116.90 yen from 117.93.

Ongoing gloom about Japan's economic fundamentals failed to provide much lift for the dollar after the US unit nudged higher against the yen on Wednesday.

In other trading, the dollar fell to 1.3453 Swiss francs from 1.3487 but rose to $1.5480 Canadian from C$1.5390, as Quebec, Canada's only French-speaking province, prepares for a vote on possible secession.

The British pound climbed to $1.6765 from $1.6725.

Trading remained very thin as investors stepped to the sidelines waiting for news on Brazil as well as more information about how the world's seven most industrialised nations may reform financial market architecture.