During early European deals on Friday, the Canadian dollar declined to a 4-day low against the US currency as the oil prices fell below $54 a barrel in Asia today. Crude oil accounts for about 10 percent of Canada's export revenue.

U.S. light crude for May delivery fell 69 cents to $53.65 a barrel by 2:04 a.m. ET, having gained nearly 3 percent on Thursday to $54.34 a barrel, after rising as high as $54.66. London Brent crude fell 56 cents to $52.90.

The loonie also weakened against the yen, but climbed to multi-day highs against the euro and the aussie.

The Canadian dollar lost ground after hitting a high of 1.2268 against the US currency at 2:10 am ET Friday. The loonie is currently trading at a 4-day low of 1.2360 against the dollar, compared to 1.2307 hit late New York Thursday. The next downside target level for the Canadian currency is seen around 1.267.

The Canadian currency that closed Thursday's North American session at 1.6648 against the European currency edged down to 1.6698 at 3:50 am Eastern Time Friday. Thereafter, the loonie reversed its direction and is currently trading at a 9-day high of 1.6516 against the euro with 1.645 seen as the next target level.

Germany's Federal Statistical Office announced today that the import price index dropped 5.4% year-over-year in January, after falling a revised 4.1% in December. This was the steepest decline since February 1999. Economists were looking a decline of 6% for January.

Against the Japanese yen, the Canadian dollar traded down during Friday's early Asian deals. At 3:30 am ET, the loonie-yen pair touched a low of 79.55, moving from an early Asian session's 3-day high of 80.50. If the pair falls further, 77.9 is seen as the next target level.

The yen advanced despite reports showed that Japan's consumer prices stalled in February and retail sales tumbled the most in seven years.

Consumer prices in Japan posted little or no change for the year to February. The government reported that its core consumer price index was unchanged in February from one year earlier, while the overall CPI was down 0.1 percent on year. The data showed overall inflation was down 0.3 percent compared to one month earlier.

The information triggered warnings from analysts that Japan faces deflation, but Finance Minister Kaoru Yosano reacted Early Friday saying it was too early to conclude that deflation was already occurring. I believe it is too early to describe the 0.1 percent decline as deflation, Yosano told reporters in Tokyo.

Another report showed that retail sales in Japan plummeted by 5.8 percent in February when compared to a year earlier. The decline was the sharpest in 7 years and the 5th straight month of lower retail sales.

The Canadian dollar that closed Thursday's New York deals at 0.8637 versus the Australian currency reached a 2-day high of 0.8573 at 1:20 am ET Friday. Thereafter, the loonie eased but rebounded shortly and the pair is currently quoted at 0.8610. The next upside target level for the loonie is seen around 0.848.

Turning to the US, the Bureau of Economic Analysis is due to release its personal income & outlays report for February. Economists estimate the report, which is due out at 8:30 am ET, to show that personal income fell 0.1% during the month. On the other hand, personal spending is expected to have risen 0.3% in the month.

The final reading of the University of Michigan's consumer sentiment index for March is due to be released at 10 am ET. The report is expected to show that the consumer sentiment index edge down to 56 from the mid-month reading of 56.6.

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