The US dollar fell against the euro and retreated from a three-month high against the yen after data showed the US economy shed 23,000 private sector jobs in March, confounding expectations for a 40,000 job gain and stoking worries about the U.S. labor market.  After the initial negative reaction, markets may reserve further judgment on US employment until Friday's more comprehensive payrolls report is released. Economists expect it to show 190,000 new jobs were added this month, boosted partly by US census-related employment.

The euro extended gains against the US dollar to session peaks above $1.35, boosted largely by quarter-end buying. The single currency was also aided by the weaker than expected jobs data out of the US. Euro zone fiscal worries, however, will likely limit any further gains.  Even if the euro succeeds in moving higher from current levels, sustainability is questionable given the constant outpour of negative data from the euro zone. 

The British pound extended its rally versus the US dollar for a fourth successive day as traders covered extreme short positions in the UK currency, which was also supported by a wave of yesterday's positive economic news. Tuesday's data showed an upward revision in UK economic growth for the last quarter of 2009, but further gains are being capped by political uncertainty. Market participants remained on edge that a looming general election may result in a hung parliament where no one party holds a clear majority, potentially making it difficult to pass tough initiatives to decrease Britain's debt.

The Japanese yen hit a three-month low versus the US dollar as investors sold the Japanese currency broadly into the beginning of the new fiscal year. Strong dollar demand from Japanese importers for financial year-end book closing triggered widespread buying in Asian trading, putting the pair's year highs in sight. The yen is also coming under pressure as the fiscal year-end wrapped up and we begin to see portfolio outflows from Japan. The Japanese currency breached a two-month low against the euro and a five-week low against the pound.

The Canadian dollar added to gains against the US dollar after data showed the economy grew at a faster-than-expected pace in January. Canada's economy grew 0.6 percent in January compared with December, led by widespread gains in manufacturing, as well as strong wholesale trade, construction, retail sales and finance. The data confirms economists' view that the economic rebound is more robust than expected. After a stunning 5 percent annualized growth in the fourth quarter, most economic data has been surprisingly strong and should continue to push the Canadian dollar higher.

The Australian dollar tumbled after a slump in domestic retail sales clouded speculation that the Reserve Bank of Australia (RBA) may raise interest rates next week. The February retail data showed the RBA's steady tightening in the past months has dampened consumer's mood. This adds to the case that RBA can afford to wait in April and not raise rates, having already hiked four times since October.  The New Zealand dollar slipped against the US dollar on Wednesday, dragged lower by a weaker Australian dollar and a softer local confidence data.


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10-Year Treasury Note Yield:  3.843%

Dow Jones Industrial Average:  10,868.80 - 39.23