In early European deals on Tuesday, the Canadian dollar extended its Asian session's uptrend against the greenback and the yen as the crude oil prices rose above $49 per barrel today.
U.S. crude climbed 84 cents to $49.25 a barrel by 6:02 am ET, having earlier climbed more than $1 to as high as $49.46. London Brent crude rose $1.09 to $49.08.
Oil's more than 9 percent rally in March has been prompted by a rally stock markets and lower oil supplies as the Organization of the Petroleum Exporting Countries cuts production.
The price is still down nearly $100 from the record high reached last year because the global economic crisis has eroded oil demand. Worldwide, demand is expected to contract in 2009 for a second consecutive year.
On the other hand, Canadian dollar fell to near a 3-month low against the aussie and a 4-day low against the euro.
Oil plummeted yesterday after the Obama administration's talk of takeover and bankruptcy for two major U.S. automakers and bank rescues in Europe prompted investors to book profits after a recent run-up to a four-month high.
The Canadian dollar rose to 1.2506 against the US currency during early deals on Tuesday. The next upside target level for the Canadian dollar is seen at 1.245. At yesterday's North American session close, the greenback-loonie pair was quoted at 1.2624.
In early trading on Tuesday, the Canadian dollar advanced against the yen. At about 6:45 am ET, the loonie-yen pair reached 78.75, up from yesterday's close of 77.10. The near term resistance level for the pair is seen at 80.5.
The yen slumped today after a report showed that Japan's unemployment rate jumped to a 3-year high in February. The Ministry of Health, Labor and Welfare said that Japan's seasonally adjusted unemployment rate increased to 4.4% in February, slightly higher than forecasts for a 4.3 percent increase after the 4.1 percent gain in January.
The Canadian dollar declined to a 4-day low of 1.6689 against the euro in early deals on Tuesday. This may be compared to yesterday's close of 1.6669. If the loonie weakens further, it may likely target the 1.678 level.
The Euro-zone March CPI, Italian January retail sales, German March unemployment rate and the French February housing starts, which were released today likely influenced the European currency.
According to a flash estimate from the Eurostat, Euro zone annual inflation slowed to 0.6% in March from 1.2% in February. Inflation has eased to its lowest level since the launch of euro ten years ago.
The Italian statistical office ISTAT said retail sales rose 0.7% year-on-year in January, while economists anticipated 2% fall. Month-on-month, sales were up 0.3% in January compared to a fall of 0.2% expected by economists.
A report from the German Federal Labor Agency showed that seasonally adjusted unemployed rose 69,000 in March, bigger than 50,000 increased in February. Economists had expected a relatively small increase of 52,000. Meanwhile, the jobless rate rose to 8.1%, while economists had forecast the rate to remain at February's revised 8%.
French housing starts dropped 22.1% year-on-year in the three months to February. This comes after a 20.2% fall in the three months to January. Housing permits declined 14.8% in the three-month period to February, marking a larger fall than the 9.1% in the previous period.
During early deals on Tuesday, the Canadian dollar fell to 0.8676 against the Aussie. This set the lowest point for the loonie since January 05. On the downside, 0.881 is seen as the next target level for the Canadian currency. The aussie-loonie pair was worth 0.8604 at yesterday's close.
The Reserve Bank of Australia's financial aggregates data for February showed that credit issued to the private sector in Australia was up 5.4% on year in February, while credit issued was steady with a 0.5% gain on month.
Looking ahead of the North American session, today will be a busy day with the releases of the S&P/Case-Shiller home price index for January, Chicago PMI for March and the consumer confidence report for March.
Also, Philadelphia Federal Reserve Bank President Charles Plosser is scheduled to deliver a speech on regulatory reform to the University of Chicago Booth School of Business at 1 pm ET.
From Canada, the GPD report for January and the industrial product price index for February are expected.
Financial markets also look forward to the Bank of Japan's Tankan survey report, which is scheduled for tomorrow. Analysts expect Japan's business sentiment fell to minus 55 in the first quarter from minus 24 in the fourth quarter. If the report comes in worse than expected, the yen may come under heavy selling pressure.
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