Wednesday during early deals, the US dollar and the Japanese yen soared against their key counterparts as the global stock market weakness boosted demand for perceived safe haven currencies.

The dollar and the yen are viewed as safe-haven currencies and tend to attract buying when worries about the global economy and financial markets flare up, but come under pressure when such concerns recede.

Stocks across the Asia-Pacific are substantially down, dragging higher yielding currencies lower and bolstering the demand for the low-yielding currencies like dollar and yen. Stocks fell today as traders expressed some anxiety about the upcoming earning season as the big earnings drops from Alcoa rekindled worries that the world's largest economy will not move soon out from the recession.

In early trading, Australia's benchmark S&P/ASX 200 index is losing 51 points or 1.37% to 3,656 and Japan's key Nikkei index opened weaker at 8,747 compared to its previous close of 8,833, is currently trading at 8,658, down 174.59 points. These markets are trading taking cues from the Wall Street where, the Dow closed down 186.29 points or 2.3% at 7,790, while the Nasdaq closed down 45.10 points or 2.8% at 1,562 and the S&P 500 closed down 19.93 points or 2.4% at 816.

The dollar strengthened in Wednesday's early trading versus the euro and climbed to a 1-week high of 1.3179. If the dollar rises further, 1.31 is seen as the next likely target level. The euro-dollar pair closed Tuesday's deals at 1.3273.

The dollar has been climbing against the euro since the beginning of this year as the financial crises prompted mass sell off of stocks. But the dollar lost ground in early March and hit as low as 1.3737 on March 19, but the buck rebounded thereafter.

The euro has been dropping against its major counterparts as more discouraging economic reports were released from the euro-zone economy, adding more pressure on the ECB to lower interest rates further.

Euro-Zone PPI dropped and the retail sales declined more than expected. Yesterday's report showed a record contraction in the euro-zone economy in the fourth quarter than initially estimated, fueling fears that the European central bank may ease the monetary policy further.

While lowering its key interest rate by 25 basis points to a new low of 1.25% last week, ECB President Jean-Claude Trichet signaled that there is still room to cut the benchmark interest rate for Eurozone and said the world economy is undergoing a severe downturn.

The US currency rallied to 1.4665 against the pound during Wednesday's early trading, compared to 1.4734 hit late yesterday in New York. On the upside, the next likely target for the US dollar is seen around the 1.445 level.

The pound has been weakening as UK's consumer confidence tied to a record low in March. Nationwide said today that an index measuring consumer confidence in the United Kingdom posted a record low reading of 41.That was lower than analyst expectations for a score of 45 after the index came in at 43 in February.

Pound's loss compounded further as the National Institute of Economic and Social Research said that the economy of Great Britain contracted by an estimated 1.5 percent in the first three months of 2009. The Institute's estimate was slightly lower than the 1.6 percent contraction officially recorded for the final quarter of 2008.

Against the currency of Switzerland, the US dollar spiked up to a 1-week high during Wednesday's early trading. The dollar-franc pair edged up to 1.1503 by about 1:30 am ET. If the greenback rises further, 1.155 is seen as the next upside target level. At yesterday's New York session close, the pair was quoted at 1.1427.

In the European session, the Bank of France business sentiment index, British retail consortium shop price index and the German Factory orders reports are expected.

At the same time, the dollar weakened versus the yen due to across the board rallying of the latter. As a result, the dollar dropped to a 5-day low of 99.77 against the yen. If the dollar moves down further, it may test support around the 99.3 level.

From US, the Commerce Department is due to release its wholesale inventories report at 10 am ET today. Economists expect wholesale inventories at the end of February to show a 0.6% decline.

Half an hour later, the Energy Information Administration is scheduled to release its weekly petroleum inventory report.

At 2:00 pm ET, the Federal Reserve is scheduled to release the minutes of its March 17th-18th meeting. Along with an announcement to keep interest rates unchanged at exceptionally low levels following its two-day FOMC meeting in March, the Fed said it would purchase $300 billion worth of longer-term securities over the next 6 months. Additionally, the Fed said it will buy an incremental $750 billion worth of mortgage-backed securities and $100 billion of government sponsored enterprises - GSE debt. The Fed also said it intends to add $100 billion to its purchases of agency debt.

The US dollar also traded higher against the commodity related currencies during this time period. The dollar climbed to a 6-day high of 0.5721 against the New Zealand dollar, from Tuesday's closing value of 0.5761.

Against the Canadian dollar and the Australian dollar, the greenback hit highs of 1.2441 and 0.7062, compared to yesterday's closing values of 1.2374 and 0.7111, respectively.

Yesterday, the Reserve Bank of Australia cut a quarter of a percentage point to a 49-year low of 3.0%, saying the economy is contracting, but at a slower pace than other major economies. The initial impact on the Australian dollar was positive, but the currency subsequently fell against the dollar.

The yen climbed against other major currencies as falls in share prices prompted investors to flock to their perceived safety. However, the yen showed limited response to the news that the Japanese current account surplus halved in the month of February.

In a preliminary report, the ministry said that current account balance in Japan swung to a surplus in February, coming in at 1.116 trillion yen. That's down 55.6 percent on year, even though it beat expectations for a surplus of 1.071 trillion yen following the record 172.8 billion yen shortfall in January. The current account surplus was 125.4 billion yen in December, 581.2 billion yen in November and 960.5 billion yen in October.

During Asian deals on Wednesday, the yen strengthened to 146.63 against the British pound. If the yen climbs further, it may likely target the 142.3 level. The pound-yen pair closed Tuesday's deals at 147.98.

Against the currencies of Europe and Switzerland, the yen climbed to a 6-day high of 131.74 and 87.04 by about 1:20 am ET. This may be compared to Tuesday's New York session closing values of 133.30 and 87.93, respectively. The next upside target level for the yen is seen at 85.9 against the franc and 130.3 against the euro.

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