In early European deals on Wednesday, the British pound extended its Asian session's downtrend against other major currencies.

Against the currency of Europe, the pound dropped to 0.9230 during early deals on Wednesday. The near term support level for the pound is seen at 0.925. The euro-pound pair was worth 0.9176 at yesterday's close.

The euro strengthened despite a report showed that German business confidence fell to a record low in March. A monthly survey from the Munich-based Ifo Institute for Economic Research showed that German business confidence deteriorated to 82.1 in March from 82.6 in February. This was the lowest reading since the survey began in 1991. The expected level for March was 82.2.

The index measuring current situation worsened to 82.7 in March from 84.3 last month. However, the index stood above the expected reading of 82.5. On the other hand, the expectations index rose to 81.6 from 80.9 last month. Economists were expecting a reading of 81.5 for March.

In early trading on Wednesday, the pound slipped against the dollar and hit a low of 1.4582 at 5:00 am ET. This may be compared to Tuesday's closing value of 1.4682. On the downside, 1.445 is seen as the next target level for the UK currency.

At a White House press conference yesterday, U.S. President Barack Obama called the U.S. dollar ''extraordinarily strong'' because of confidence in U.S. economic prospects and said he sees no need for a single global currency. But his comment had little impact on the currency market.

The pound that closed yesterday's trading at 143.72 against the yen declined to 142.46 in early deals on Wednesday. If the pound-yen pair weakens further, it may likely target the 142.00 level.

A retreat in Asian stocks supported the yen as the yen is viewed as a safe-haven currency amid the global financial crisis, and it often fluctuates depending on perceived shifts in investors' tolerance for risk.

In carry trade, investors borrow money from Japan where the interest rate is low to buy high yielding assets in other countries. So, an unwinding of carry trades results in traders liquidating their investments and scrambling for yen to repay their yen-denominated loans, which pushes up the value of the Japanese currency.

The yen also gained today as a government report showed that Japan posted trade surplus in February for the first time in five months.

The Ministry of Finance said that Japan saw a merchandise trade balance of 82.4 billion yen in February, marking the first surplus in five months. The February figure came in better than expectations for a 13.7 billion yen deficit following the revised record 956.9 billion yen shortfall in January. The original figure came in at -952.6 billion yen.

Exports plummeted by a record 49.9 percent on year to 3.525 trillion yen, the data showed, falling for the fifth consecutive month. That was worse than forecasts that had predicted an annual decline of 47.6 percent after the 45.7 percent fall in January.

Imports fell 43.0 percent on year to 3.443 trillion yen, declining for the fourth straight month. Analysts had expected a fall of 38.4 percent on year after the revised 31.9 percent decline in the previous month.

Meanwhile, the Bank of Japan Deputy Governor Hirohide Yamaguchi said today that Japan's economic and financial conditions will likely continue to be severe. Addressing business leaders in Otaru, Yamaguchi said at this point, the central bank is giving higher priority for securing market stability and facilitating corporate financing, which are the second and third main areas of the BoJ's conduct of monetary policy.

He said the BoJ will continue to examine carefully developments in financial markets and corporate financing adding that the bank will take necessary measures in a decisive manner without any predetermined view.

During early deals on Wednesday, the pound fell to 1.6503 against the Swiss franc. The next downside target level for the UK currency is seen at 1.622. At Tuesday's North American session close, the pound-franc pair was quoted at 1.6622.

Across the Atlantic, the US Commerce Department is set to release its durable goods orders report at 8:30 am ET. Economists look forward to a 2% decline in the durable goods orders for February.

At 10:00 am ET, the Commerce Department is due to release its new home sales report for February. The consensus estimate calls for a decline in new homes sales to 300,000.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report at 10:30 am ET.

Cleveland Federal Reserve Bank Sandra Pianalto is due to deliver a speech on forces for economic recovery Regional Growth Partnership luncheon in Maumee, Ohio at 12:20 pm ET. Meanwhile, San Francisco Federal Reserve Bank Janet Yellen is scheduled to deliver a speech to the Forecasters Club of New York on the U.S. economic situation and policy responses in New York at 12:30 pm ET.

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