Asian session: The yen gained against most of its major peers

The yen gained against most of its major peers as turmoil in Spain’s banking sector added to signs Europe’s debt crisis is spreading, boosting investor demand for safer assets. The European Central Bank denied it has rejected a plan floated by Spain’s government to recapitalize Bankia group, the nation’s third-largest lender, saying it hasn’t been approached. The Spanish government itself has backtracked on an idea to recapitalize Bankia by injecting sovereign debt into its parent company that, according to the Financial Times, could then be used as collateral to borrow from the ECB. Japan’s currency reached the strongest level in more than three months versus the dollar as the country’s benchmark bond yield fell to the lowest since 2003 and U.S. rates plunged to record lows as shares retreated globally.

The euro slid for an eighth-straight day against the yen, the longest losing streak in almost two years, before data tomorrow forecast to show European manufacturing shrank and the jobless rate in the common currency area increased. A measure of euro-area manufacturing probably decreased to 45 in May from 45.9 in April, the lowest in 35 months, according to a Bloomberg News survey of economists before London-based Markit Economics releases its final reading of the gauge tomorrow. The unemployment rate probably climbed to 11 percent last month, the highest in data compiled by Bloomberg going back to 1990, a separate poll showed before labor market figures are released tomorrow.

Losses in the euro were limited as the common currency’s 14-day relative strength index against the dollar fell to 20 yesterday, below the 30 level some traders see as signaling an asset may reverse declines.

EUR/USD: during the Asian session the pair restored, after yesterday's falling.

GBP/USD: during the Asian session the pair holds in a range $1.5460-$1.5485.

USD/JPY: during the Asian session the pair fell  below Y79.00, updated monthly low.

European data for Thursday starts at 0600GMT with Germany retail sales and also the ILO measure of employment data. France data at 0645GMT sees PPI and also consumer spending data, which is expected to come in at 0.3% m/m, 0.2% y/y.  The main German unemployment data is due at 0755GMT and is expected to show a change of -5k. At 1100GMT, ECB Governing Council member Ewald Nowotny is due to be present at the Austrian finals of Generation Euro school competition, in Vienna. US data includes same-store sales, although scheduled releases start at 1130GMT with Challenger layoffs. This is followed by the ADP National  Employment Report at 1215GMT, while at 1230GMT the weekly jobless claims are due along with the second revision of Q1 GDP data. Also at 1230GMT, Cleveland Federal Reserve Bank President Sandra Pianalto speaks to the National Association for Business Economics, in Cleveland, on monetary policy and the economic outlook. At 1345GMT, the MNI Chicago PMI is forecast to rise to a reading of 56.8 in May after falling sharply in April. Other regional data already released have been mixed. At 1430GMT, the weekly EIA Natural Gas Storage, followed at 1500GMT by the EIA Crude Oil stocks data. At 1500GMT, the New York Federal Reserve Bank releases it's Q1 report on Household Debt and Credit. Late US data sees the 1900GMT release of farm prices data and the 2030GMT release of M2 Money Supply.