In early European deals on Wednesday, the New Zealand dollar reversed the losses it incurred in Asian trading against other major currencies. The kiwi thus recovered from new multi-day lows against majors.

Against the currencies of US and Japan, the NZ dollar reached 0.5643 and 55.90 at 6:55 am ET Wednesday, up from multi-day lows of 0.5532 and 54.64, hit respectively in Asian deals. If the kiwi advances further, it may likely target 0.572 against the greenback and 56.8 against the yen. The kiwi-greenback pair closed trading at 0.5604 and the kiwi-yen pair at 55.46 on Tuesday.

The yen fell across the board as a report showed that Japan's business confidence tumbled at its fastest pace ever in the first quarter to the worst on record.

The Bank of Japan's Tankan Survey revealed today said that Japanese sentiment among large manufacturers plummeted at a record rate in the first quarter of 2009, posting a diffusion index score of -58,. That was worse than analyst expectations for -55 following a score of -24 in the previous quarter.

It was the sixth straight quarter of decline, and the fall of 34 points from the previous survey in December marked the largest fall on record. It was also worse than the previous record low of -57 in June 1975. However, the large manufacturers' outlook for the June quarter posted a mild recovery, coming in at -51.

The NZ dollar strengthened against the Aussie after hitting a 1-week low of 1.2448 by about 2:00 am ET Wednesday. The aussie-kiwi pair that closed yesterday's trading at 1.2355 is now worth 1.2325 with 1.227 seen as the next target level.

The Australian Bureau of Statistics' or ABS said today that retail sales in Australia dropped 2.0% in February on month, marking the largest monthly decline since July 2000.

The New Zealand dollar fell to a 6-day low of 2.3835 against the euro before bouncing back at 1:55 am ET Wednesday. The kiwi rose to 2.3483 per euro by about 7:00 am ET and this may be compared to Tuesday's New York session close of 2.3687. The next upside target level for the NZ currency is seen at 2.338.

Unemployment in the euro zone jumped more than expected in February to 8.5 percent, data showed today, underlining the speed of economic deterioration a day before the ECB meets on interest rates.

Joblessness in the 16 countries using the euro rose from January's upwardly revised 8.3 percent of the workforce, Eurostat, the European Union's statistics office, said. Economists had expected a level of 8.3 percent for February.

But the speed of the rise in unemployment and its negative effects on demand are likely to add pressure on the European Central Bank, which meets on interest rates tomorrow, to cut borrowing costs by 50 basis points to 1.0 percent.

Amid expectations that the ECB will slash rates, the market is focusing on whether the central bank will open the door for quantitative easing as its counterparts in the United States, Britain and Japan have already done.

Investors now look forward to the ADP employment report for March, which sheds light on non-farm private employment. The report is usually released two days prior to the Labor Department's employment report.

Private sector employment fell by more than economists had been expecting in the month of February, Automatic Data Processing, Inc. (ADP) revealed in its employment report on March 04.

ADP said that non-farm payroll employment fell by 697,000 jobs in February following a revised decrease of 614,000 jobs in January. Economists had expected employment to fall by 630,000 jobs compared to the drop of 522,000 jobs originally reported for the previous month.

In addition to ADP report, the Commerce Department is due to release its construction spending report at 10 am ET. The report is expected to show a 1.6% decline in spending for February.

At the same time, the results of the manufacturing survey of the Institute for Supply Management and the pending home sales are due out. Economists expect the ISM index to show a reading of 36 for March. The pending home sales is likely to show a 2% drop for February.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report at 10:30 am ET.

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