Asian session: The euro fell toward a three-week low versus the yen

The euro fell toward a three-week low versus the yen before a report today that may show German industrial production declined, backing the case for the European Central Bank to avoid raising interest rates. Germany’s industrial production probably decreased 0.5 percent in February from the previous month, when it gained 1.6 percent, according to the median estimate of economists in a Bloomberg News survey before the Economy Ministry releases the figure.

The 17-nation currency was near a three-week low against the dollar before France auctions bonds due from 2017 to 2041 today amid concern Europe’s prolonged debt crisis will weigh on the economy. Investor demand for the debt of Spain, the euro area’s fourth-largest economy, slumped yesterday, with the country selling 2.59 billion euros ($3.4 billion) of bonds, less than its maximum target of 3.5 billion euros. Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty” and signaled that his budget cuts are less painful than a bailout would be.

The Australian and New Zealand dollars strengthened against most of their 16 major counterparts before U.S. data tomorrow that may point to an improvement in the labor market. Employment in the U.S. probably rose by 205,000 in March, according to the median estimate of economists before tomorrow’s government report. That would be the fourth straight month with jobs growth above 200,000.

Demand for the South Pacific currencies was also bolstered as Asian stocks pared declines. The so-called Aussie was within 0.2 percent of a six-month low versus the New Zealand dollar as swaps traders increased bets the Reserve Bank of Australia will cut interest rates next month. Financial markets in both countries will be closed from tomorrow for holidays and will reopen on April 10.

EUR/USD: during the Asian session the pair traded in a range $1.3135-$1.3160.

GBP/USD: during the Asian session the pair traded in a range $1.5890-$1.5910.

USD/JPY: during the Asian session the pair fell to a yesterday's low.

Events for Thursday start at 0700GMT when the Swiss National Bank publishes the 2011 Annual Report. Swiss CPI is also due Thursday. Core-European data sees just the 1000GMT release of German industrial output data. It is a busy day for the UK, starting at 0830GMT with the data highlight of the week, February industrial production. The data is followed at 1000GMT by UK New car and CV registrations. The National Institute (NIESR) will release its estimate of Q1 GDP later in the session, at 1400GMT. The MPC will announce its April policy decision at 1100GMT. The expectation is that there will be no change either to Bank Rate or to the current 325 billion stock of QE in light of the data flow, which has offered some patchy backing to the idea of a moderate underlying recovery. The Canada Ivey Purchasing Managers Index is due at 1400GMT. US data starts at 1130GMT with Challenger Layoffs data, which is followed at 1230GMT by the weekly initial jobless claims, which are expected to remain relatively unchanged at 360,000 in the March 31 week after hitting a four-year low in the previous week. At 1310GMT, St. Louis Federal Reserve Bank President James Bullard  speaks to the 13th Annual InvestMidwest Venture Capital Forum.