Tuesday during early deals, the dollar and the yen strengthened to multi-day highs against their key counterparts as a fall in stock prices and jitters before the corporate earnings season dampened recent optimism, sparking 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.

The major markets across the Asia-Pacific region ended lower today, mirroring sentiment on Wall Street where the major indices, despite regaining some lost ground, ended lower, on profit taking. Negative comments from analysts on financial stocks, and lower commodity prices also weighed on the markets.

Japan's benchmark Nikkei 225 Index, having opened weaker at 8,834 compared to its previous close of 8,858, ended down 25.28 points, or 0.28%, at 8,832, while the broader Topix index of all First Section Issues nudged up 1.63 points to close at 833.

European shares also fell for a third consecutive session today as financials weakened along with U.S. futures, reigniting fears over the global banking sector.

U.S. stock index futures pointed to a lower open on Wall Street today as investors braced for aluminum producer Alcoa's quarterly results that will kick-start a keenly awaited U.S. earnings season.

In Asian trading, crude oil advanced $0.50 to $51.55 a barrel in electronic trading. Light sweet crude for May delivery closed down $1.46 at $51.05 a barrel on the New York Mercantile Exchange on Monday over demand concerns. Traders now look forward to Wednesday's Department of Energy inventory report.

With the focus on stock performance and risk sentiment, the yen showed limited response after the Bank of Japan announced it was leaving interest rates at 0.1 percent as expected.

The BOJ also unveiled further steps to ease credit strains, announcing it would start lending against a wider range of municipal debt to support regional banks.

BOJ Governor Masaaki Shirakawa said the Japanese economy is worsening more than the bank had forecast in January and that financial conditions are likely to remain severe.

The dollar soared to its highest level in almost 5-days against the euro during early deals on Tuesday. Currently, the euro-dollar pair is worth 1.3265, compared to yesterday's New York session close of 1.3417. If the dollar strengthens further, it may test resistance around the 1.317 level.

The euro fell below the 1.33 level against the dollar today after a report showed that Europe's recession deepened more than estimated in the fourth quarter as companies scaled back production and consumer spending declined.

A final report from the Eurostat showed that gross domestic product, or GDP, contracted 1.6% quarter-on-quarter in the final three months of 2008. The pace of decline was slightly up from the previously estimated fall of 1.5%. GDP fell 0.3% each in the third and second quarters. The statistical office also revised fourth quarter annual GDP decline to 1.5% from an initial 1.3% fall.

The financial crisis is forcing companies from carmaker Volkswagen AG to software maker SAP AG to reduce output and cut jobs. The Euro-zone economy, which grew 0.8 percent in 2008, may shrink 4.1 percent this year, the Organization for Economic Cooperation and Development has forecast. The European Central Bank is examining possible new non-standard measures to stimulate the economy after cutting interest rates to a record low.

The ECB last week cut interest rates by 25 basis points to 1.25 percent, taking its reductions since early October to 300 basis points. Still, it's lagging counterparts such as the U.S. Federal Reserve, the Bank of England and the Bank of Japan, which have cut their key rates to almost zero and are pumping money into their economies by buying government and company securities.

The dollar, which closed yesterday's trading at 1.1363 against the Swiss franc climbed to a 5-day high of 1.1468 in early deals on Tuesday. On the upside, 1.151 is seen as the next likely target for the U.S. currency.

In early deals on Tuesday, the dollar advanced to 1.4598 against the British pound. This set the highest point for the dollar since April 02. The next upside target level for the dollar is seen at 1.317. At yesterday's close, the pound-dollar pair was quoted at 1.4773.

The pound slipped on disappointing economic reports from UK. Industrial production in UK declined 1% month-on-month in February, the Office for National Statistics or ONS said. Economists had expected output to fall 1.2% in February, following a 2.7% decrease in January. Year-on-year, production was down 12.5% in February, in line with economists' expectations.

Meanwhile, manufacturing production in February dropped 0.9% from the previous month, taking the annual decline to 13.8%. Economists were looking for a monthly fall of 1.5% and an annual 14.2% drop in February.

The UK recession is still very serious and is likely to continue for sometime, a quarterly Economic Survey from the British Chambers of Commerce showed. The business lobby said there is a clear need for corrective action.

According to the survey, the manufacturing sector's balances deteriorated again in the first quarter and reached record lows in almost all critical areas. The balances for the service sector showed improvement in most key areas, though they still remain in negative territory.

Commenting, Director General of the BCC, David Frost, said, The Budget is an opportunity for the government to show business that it is doing everything possible to support them. It will be business that drives the UK out of recession and for this reason it is vital that they have the freedom to create jobs and wealth.

The yen rose to a 5-day high of 133.10 against the euro during early deals on Tuesday. If the Japanese currency gains further, it may likely target the 131.9 level. At yesterday's close, the euro-yen pair was quoted at 135.49.

The yen has advanced 3% against the euro after it reached a 5 1/2 -month low of 137.44 yesterday.

During early trading on Tuesday, the yen strengthened to a 4-day high of 146.78 against the pound and 87.57 against the franc. If the yen climbs further, it may likely target 145.6 against the UK currency and 85.8 against the Swiss franc. The pound-yen and the franc-yen pairs were worth 149.20 and 88.92, respectively at Monday's close.

In early deals on Tuesday, the yen gained against the dollar and reached a 4-day high of 100.20 at 4:50 am ET. The next upside target level for the Japanese currency is seen at 98.4. The dollar-yen pair was worth 100.99 at Monday's North American session close.

The yen depreciated 14% against the dollar after it reached a 13-year high of 87.13 on January 21 and slumped beyond the 101 yesterday for the first time in almost 5 1/2 -months. But the yen reversed direction after hitting a low of 101.46 at 5:00 am ET and thus far it has gained 1.2%.

Investors are now likely to focus on the North American session, in which the U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 pm ET. Consumer credit for February is likely to show a decline of $1.5 billion.

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