In early European deals on Tuesday, the U.S. dollar and the Japanese yen erased their Asian session gains and declined further against other major currencies despite renewed worries about Europe's debt crisis.
The U.S. dollar and Japanese yen are considered as safe haven currencies as these countries have lower lending rates. These currencies tend to gain in times of financial turmoil and vice-versa.
Spanish 10-year government bond yields rose above 6 percent for the first time this year yesterday following news that the ECB lending to the country's financial institutions almost doubled since February.
Investors now focus on the Spanish debt auction results, where the government aims to raise between EUR 2 billion and EUR 3 billion from the auction of short-term Treasury bills.
The dollar is now trading at 4-day lows of 1.3170 against the euro and 0.9130 against the franc, compared to highs of 1.3092 and 0.9184, hit respectively at 2:35 am ET. If the dollar weakens further, it may likely target 1.320 against the euro and 0.910 against the franc.
The dollar that rose to as high as 1.5865 against the pound at 2:30 am ET declined thereafter. The dollar is currently trading at a 5-day low of 1.5973 per pound with 1.600 seen as the next downside target level.
U.K. annual inflation rose to 3.5 percent in March from 3.4 percent in February, the Office for National Statistics showed. Economists were expecting the annual rate to remain at 3.4 percent. Inflation continues to hover above the 2 percent inflation target.
Meanwhile, consumer prices logged a 0.3 percent rise on a monthly basis, much slower than the 0.6 percent growth seen in February. The increase matched economists' expectations.
The yen also pared its gains, hitting 4-day lows of 106.32 against the euro, 128.84 against the pound and 88.46 against the franc, compared to highs of 105.34, 127.61 and 87.63, respectively. The next downside target level for the yen is seen at 88.8 against the franc, 107.0 against the euro and 129.5 against the pound.
Against the US dollar, the yen is trading at 80.76 with 81.0 seen as the next downside target level.
Looking ahead, the U.S. industrial production, housing starts and building permits - all for the month of March are expected in the New York morning session.
The Bank of Canada is scheduled to announce its decision on interest rates at 9 am ET. Analysts expect the central bank to retain its rate at 1 percent.
by RTT Staff Writer
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