During early European deals on Tuesday, the New Zealand dollar extended its Asian session's downtrend against other major currencies as a decline in stock prices reduced demand for higher-yielding currencies. The kiwi thus slumped to new multi-day lows against its major counterparts.

New Zealand's economic recession probably worsened in the first three months of 2009, according to survey results released today by the New Zealand Institute of Economic Research (NZIER).

The institute's Quarterly Survey of Business Opinion showed a seasonally adjusted net 47 percent of firms reporting decreased business activity. The figure was worse than the 44 percent negative reading recorded for the preceding quarter, and was the lowest since at least 1970.

NZIER's report also said the nation's recession was likely to be deeper than its previous forecast. The institute said GDP for the March quarter is expected to be as bad if not worse than the 0.9 percent contraction recorded in the December quarter.

The New Zealand dollar, which closed yesterday's trading at 0.5887 against the U.S. currency, fell to a 5-day low of 0.5745 during early deals on Tuesday. If the aussie-greenback pair weakens further, it may test support around the 0.556 level.

In early trading on Tuesday, the NZ currency dropped to a 5-day low of 57.46 against the yen. The next downside target level for the kiwi is seen at 54.1. At yesterday's New York session close, the pair was quoted at 59.46.

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 New Zealand dollar edged down against the Aussie in early deals on Tuesday. The aussie-kiwi pair that closed yesterday's trading at 1.2139 reached 1.2342 by about 5:55 am ET. This set a 5-day low for the kiwi. On the downside, 1.241 is seen as the next likely target for the NZ dollar.

Today, the Reserve Bank of Australia slashed the cash rate unexpectedly by a 25 basis points to a 49-year low to support the shrinking economy.

The RBA decided to lower the cash rate to 3%, effective April 8. Economists had expected the central bank to hold the key interest rate at 3.25%. The central bank has reduced the cash rate by 125 basis points since December 2008 and the official cash rate now stands at its lowest level in 49 years.

During early deals on Tuesday, the NZ dollar declined to a 4-day low of 2.3115 against the euro. This may be compared to yesterday's closing value of 2.2805. If the kiwi slides further, it may likely target the 2.32 level.

A final report from the Eurostat showed today 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.

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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