In early deals on Tuesday, the Canadian dollar strengthened against its major counterparts despite lower oil prices. The loonie surged up to a new multi-month high against the yen, 6-day high against the euro, 5-day high against the greenback. Against the aussie, the loonie recovered from a new multi-month low.

Oil edged down toward $53 per barrel today, as investors took profits after a 3 percent rise in the previous session that was supported by a surge in global stock markets on a new U.S. banking rescue plan.

U.S. light crude for May delivery fell 53 cents to $53.27 a barrel at 5:17 am ET, after settling at $53.80, up $1.73 on Monday. London Brent crude was down 70 cents at $52.77.

In early trading on Tuesday, the Canadian dollar strengthened to a 6-day high of 1.6573 against the European currency. The next upside target level for the Canadian dollar is seen at 1.642. At yesterday's close, the euro-loonie pair was quoted at 1.6681.

The euro tumbled as the German government forecast the largest Eurozone economy to contract in the range of 4% to 4.5% this year, the German newspaper Bild reported today. Yesterday, the Commerzbank AG had downwardly revised its forecast for the German economy, citing the recent collapse of order intake. The bank now expects the German economy to shrink 6%-7% this year versus an earlier forecast of 3%-4% contraction. Other research institutes RWI and IMK also forecast the German economy to contract this year.

The French February consumer spending and business confidence indicator for March, Euro-zone January current account and the manufacturing PMI report, which were also released today likely influenced the euro.

The Canadian dollar, which closed yesterday's trading at 79.32 against the yen rose to 80.73 during early deals on Tuesday. This set the highest point for the Canadian currency since November 14. If the loonie-yen pair moves up further, it may likely target the 82 level.

The board members of the Bank of Japan suggested that the Japanese economy may begin to recover from the current recession in the second half of this year at the earliest, minutes from the February 18 and 19 monetary policy meeting revealed today.

The members also said that they might need to cut their view of Japan's long-term growth - especially since there was more demand than expected for BoJ funds. The board also said that an exit strategy was needed for the series of economic stimulus measures.

The Canadian dollar advanced against the Aussie after hitting a new multi-month low of 0.8663 by about 8:50 pm ET Monday. Currently, the aussie-loonie pair is worth 0.8585, compared to yesterday's North American session close of 0.8633. The near term resistance level for the loonie is seen at 0.835.

The Canadian dollar jumped to a 5-day high of 1.2205 against the US currency at 9:05 pm ET Monday. Thereafter, the loonie weakened but rebounded during early Tuesday European deals and the pair is now worth 1.2220 with 1.219 seen as the next target level. The greenback-loonie pair closed yesterday's trading at 1.2233.

Across the Atlantic, today will be a busy day including a testimony on AIG from Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner to the U.S. House Financial Services Committee.

AIG has come under severe attack for awarding multimillion-dollar bonuses to executives following a $180 billion bailout from the U.S. government.

Markets will also receive information on the Richmond region manufacturing sector. The Richmond Fed manufacturing index is expected to remain unchanged at -51 in March.

The Federal Housing Finance Agency will also release its house price index for January. House prices are expected to fall 0.9% against a 0.1% increase in December.

In the afternoon, James Bullard, President of the Federal Reserve Bank of St. Louis, will speak in London.

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