Wednesday, the Canadian dollar declined to a 2-day low against its US and Japanese counterparts, driven by a fall in oil price. The loonie also showed weakness against the European currency, while reached a 5-day high versus the Australian dollar.

The oil price fell today on further signs of reducing demand in the world's top consumers and the deepening economic crisis, and as equities slipped on fading confidence about a U.S. bank rescue plan.

U.S. light crude for May delivery fell 72 cents to $53.26 a barrel by 2:54 am Eastern time, after touching a near three-month high above $54 on Tuesday. London Brent crude fell 80 cents to $52.70.

Against the US dollar, the Canadian currency traded down during early deals on Wednesday. At 4:35 am ET, the loonie touched a 2-day low of 1.2358 against the dollar, compared to 1.2323 hit late New York Tuesday. The dollar-loonie pair is currently trading at 1.2326 with 1.213 seen as the next target level.

The Canadian dollar that closed Tuesday's North American session at 1.6597 against the European currency slipped to 1.6615 at 5:20 am ET Wednesday. The next downside target level for the Canadian currency is seen around 1.697.

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.

Italy's economic think tank ISAE said today that consumer confidence in the economy declined in March after rising in past two months.

The consumer confidence index fell to 99.8 in March from 104 recorded in February. Economists had forecast the reading to decline to 103.

Against the Japanese yen, the Canadian currency edged down during Wednesday's early deals. At 4:30 am ET, the loonie-yen pair declined to a 2-day low of 78.90, compared to Tuesday's closing value of 79.46. If the pair falls further, 77.8 is seen as the next target level.

The yen climbed against its major counterparts today as Japanese Ministry of Finance said that Japan posted a merchandise trade balance of 82.4 billion yen in February. Analysts were expecting a 13.7 billion yen deficit following a 956.9 billion yen shortfall in January.

Addressing business leaders in Otaru, the Bank of Japan Deputy Governor Hirohide Yamaguchi said that Japan's economic and financial conditions will likely continue to be severe. Yamaguchi said that, 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.

The Canadian dollar that closed Tuesday's New York deals at 0.8573 versus the Australian currency reached a 5-day high of 0.8526 at 4:30 am ET Wednesday. On the upside, 0.849 is seen as the next target level for the loonie. The aussie-loonie pair is currently quoted at 0.8581.

The Australian government will provide a time-limited voluntary guarantee over state government borrowing, Treasurer Wayne Swan said today.

The guarantee will be provided for existing and new issuances of securities, but the scheme will not cover issuances denominated in foreign currencies. The scheme will allow states to readily structure their finance requirements to meet their longer term infrastructure plans.

In the New York session, the US February durable good orders and new home sales reports are expected. Also, Federal Reserve Bank of San Francisco President Janet Yellen and Federal Reserve Bank of Cleveland President Sandra Pianalto are scheduled to speak.

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