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Canadian Dollar Rallies As Oil Prices Rebound; Bank Of Canada Rate Decision Eyed

The Canadian dollar strengthened against its major rivals in early deals on Tuesday as oil prices, the nation's biggest export, rebounded from yesterday's multi-day lows. Results of the Spanish Treasury debt auction and data showing improvement in Germany's economic sentiment for the fifth straight month in April also lifted risk-appetite.

Crude oil recouped today after losing some ground over the renewed concerns about the health of European economy on Monday. Light Sweet crude oil for May delivery is currently trading at a 4-day high of $103.70 per barrel, up $0.77 from its previous close.

The Bank of Canada is set to announce its interest rate decision at 9:00 am ET. Analysts expect the central bank to keep rates steady at an extremely low 1 percent for 20 months in a row. The rate is seen unchanged till the second quarter of 2013.

The Canadian dollar climbed to a 4-day high of 0.9965 against its US counterpart on Tuesday, having recovered from yesterday's multi-day low of 1.0035. The next barrier for the loonie is seen at 0.9955, at which the 50-day SMA lies in the daily chart of USD/CAD.

Against the yen, the Canadian currency moved past the 0.81 level around 7:15 am ET. The loonie-yen pair is presently worth 81.02 and a further rally could help the pair re-test its 10-day SMA at 81.40.

Industrial production in Japan declined 1.6 percent month-on-month in February, final data from the Ministry of Economy, Trade and Industry showed today. This compares to the preliminary reading of 1.8 percent fall, according to data updated after the ministry's annual data revision. Annually, production rose 1.5 percent in February, the report said.

Meanwhile, Japan's consumer confidence increased in March, a monthly survey by the Cabinet Office revealed today. On a seasonally adjusted basis, the consumer confidence index rose to 40.3 in March from a revised reading of 39.9 in February. Economists expected the index to rise to 40 from February's initial reading of 39.5.

The Canadian currency that tested yesterday's 4-day low of 1.3150 against the euro in early Tuesday Asian deals snapped back to above the 1.31 level around 7:05 am ET. On the upside, the loonie may find target around the 1.3085 level.

Germany's economic sentiment improved for the fifth straight month in April, the Mannheim-based Centre for European Economic Research (ZEW) said today. The indicator of economic sentiment rose to 23.4 in April from 22.3 in March. Economists had expected the index to fall to 19.

Traders are now likely to focus the economic data across the boarder, where the U.S. industrial production, housing starts and building permits - all for the month of March are expected in the New York morning session.

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