Australian Dollar Extends Uptrend Against Majors

In early European deals on Tuesday, the Australian dollar extended its Asian session's uptrend against other major currencies despite a fall in local stocks.

The Australian market tumbled today, led down by banks and miners, as a slump on Wall Street on concerns about bad debts on bank balance sheets and the Reserve Bank of Australia governor Glenn Stevens' statement that Australia was in a recession, weighed on sentiment.

The benchmark S&P/ASX200 index closed at 3,677, down 92 points or 2.43% and the All Ordinaries index fell 89 points or 2.4% to 3,633.

The global economic downturn has pushed Australia's economy into its first recession since 1991, Reserve Bank of Australia Governor Glen Stevens said today. At the same time, he expressed confidence in the country's long-term prospective.

Speaking at the Australian Institute of Company Directors in Adelaide Stevens said, "Whether or not the next GDP statistic, due in early June, shows another decline, I think the reasonable person, looking at all the information available now, would come to the conclusion that the Australian economy, too, is in recession."

"It is very rare for Australia to escape an international downturn and there is no precedent for avoiding one of this size," he said.

The Aussie, which closed yesterday's trading at 0.6969 against the U.S. currency and 68.27 against the yen strengthened to 0.7053 and 69.33, respectively in early deals on Tuesday. If the aussie gains further, it may likely target 0.715 against the greenback and 70.7 against the yen.

During early deals on Tuesday, the Aussie advanced against the euro and reached a high of 1.8404 at 4:35 am ET. This may be compared to Monday's closing value of 1.8551. On the upside, 1.835 is seen as the next target level for the Australian currency.

Germany's Federal Statistical Office announced that the producer price index or PPI dropped 0.5% year-over-year in March, in contrast to a 0.9% rise recorded in the previous month. Economists were looking an increase of 0.1%. Destatis said the producer price fall in March was the lowest since September 2002, when prices declined 1.1%.

On a monthly basis, producer prices declined 0.7% in March, after falling 0.5% in February. Economists had predicted a decline of 0.3%.

Meanwhile, the Center for European Economic Research, or ZEW, said in a report that its economic sentiment index for Germany rose to 13 in April from minus 3.5 in March. Meanwhile, economists had expected the index to rise to 2. The indicator marked a positive reading for the first time since July 2007.

The Aussie rose against the Canadian dollar during early trading on Tuesday. At about 4:25 am ET, the aussie-loonie pair hit 0.8718, up from yesterday's closing value of 0.8637. The near term resistance level for the pair is seen at 0.879.

Traders are now likely to focus on the Bank of Canada's interest rate decision, which is due at 9:00 am ET. Analysts expect the central bank to keep rates steady at 0.5%.

Before the BoC rate announcement, the Canadian wholesale sales report for February has been slated for release at 8:30 am ET.

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