The US dollar extended its Asian session's downtrend against most major currencies during early European deals on Friday as a strong stock markets reduced demand for the safety of the US currency.

The U.S. economy, the world's biggest, shrank at its fastest pace since 1982 in the fourth quarter, data showed yesterday. But the headline figure of a 6.3 percent contraction was slightly better than the consensus forecast of a 6.6 percent decline.

Against the European currency, the US dollar edged down during early deals on Friday. At 2:10 am ET, the dollar slipped to 1.3594 against the euro, compared to 1.3527 hit late New York Thursday. The next downside target level for the US currency is seen around 1.374.

The US dollar gained ground after hitting a low of 1.4496 against the British pound at 2:10 am ET Friday. The dollar is currently trading at 1.4445 against the pound with 1.43 seen as the next target level. The pound-dollar pair closed Thursday's North American session at 1.4455.

Against the Swiss franc, the US currency traded down during Friday's early deals. At 2:10 am ET, the dollar-franc pair touched 1.1223, down from Thursday's closing value of 1.1273. If the pair falls further, 1.116 is seen as the next target level.

The greenback extended its Asian session's downtrend versus the Japanese yen during Friday's early European deals. The dollar-yen pair that closed Thursday's New York deals at 98.71 declined to 97.70 at 2:50 am ET. On the downside, 95.7 is seen as the next target level for the pair.

The yen advanced against its major counterparts despite reports showed that Japan's consumer prices stalled in February and retail sales tumbled the most in seven years.

Consumer prices in Japan posted little or no change for the year to February. The government reported that its core consumer price index was unchanged in February from one year earlier, while the overall CPI was down 0.1 percent on year. The data showed overall inflation was down 0.3 percent compared to one month earlier.

The information triggered warnings from analysts that Japan faces deflation, but Finance Minister Kaoru Yosano reacted Early Friday saying it was too early to conclude that deflation was already occurring. I believe it is too early to describe the 0.1 percent decline as deflation, Yosano told reporters in Tokyo.

Another report showed that retail sales in Japan plummeted by 5.8 percent in February when compared to a year earlier. The decline was the sharpest in 7 years and the 5th straight month of lower retail sales.

At 5.00am ET, the Italian statistical office ISTAT is slated to release industrial orders for January. Economists forecast orders to drop 4.5% month-on-month in January, after decreasing 2% in December.

Half an hour later, UK's fourth quarter GDP and current account reports are expected from the Office for National Statistics. The current account deficit is estimated to decline to GBP 5.9 billion from GBP 7.7 billion in the third quarter.

At 6.00am ET, the Eurostat is scheduled to issue Eurozone industrial new orders for January. Industrial new orders are expected to plunge 28.4% in January from the previous year versus 22.3% decrease in December.

Turning to the US, the Bureau of Economic Analysis is due to release its personal income & outlays report for February. Economists estimate the report, which is due out at 8:30 am ET, to show that personal income fell 0.1% during the month. On the other hand, personal spending is expected to have risen 0.3% in the month.

The final reading of the University of Michigan's consumer sentiment index for March is due to be released at 10 am ET. The report is expected to show that the consumer sentiment index edge down to 56 from the mid-month reading of 56.6.

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