The yen appreciated marginally vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥106.85 level and was capped around the ¥107.55 level. Technically, today’s intraday low was right around the 38.2% retracement of the move from ¥110.10 to ¥104.95. As expected, the Japanese government downgraded its assessment of the economy for the first time since November 2006, citing slowed exports and industrial production growth, weakness if consumption, and problems in housing construction. The government also increased its concern over U.S. economic weakness. Bank of Japan Governor Fukui reported Judging from the volatility of the forex and stock markets, investors are still showing a strong aversion to risk. Against the background of unstable financial and capital markets, uncertainties about the global economy are growing. Fukui will retire in March and is likely to be replaced by BoJ Deputy Governor Muto. Data released in Japan overnight saw January supermarket sales fall for the 25th consecutive month. The Nikkei 225 stock index lost 1.37% to close at ¥13,500.46. Dollar bids are cited around the ¥106.15 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥159.25 level and was supported around the ¥158.55 level. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥211.50 and ¥98.70 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.1418 in the over-the-counter market, up from CNY 7.1413. People’s Bank of China reported consumer price inflation will remain relatively high in 2008. PBoC also reported the yuan will be allowed to appreciate gradually.