The yen extended recent gains vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥95.70 level and was capped around the Â¥99.10 level. The pair fell in a stunning show of force in the Australasian session as traders continued to unwind short yen carry trades amidst escalating risk aversion and heightened volatility. Traders are on high alert for yen-selling intervention from Japanese monetary authorities, cognizant of the fact that the last overt intervention in Japan took place five years ago today. Some dealers believe actual yen-selling intervention may not stop the flight to the yen because many of the issues that are causing the yen appreciation are borne from U.S. financial market problems. Vice finance minister Tsuda said he is concerned about excessive foreign exchange movements while finance minister Nukaga said we are watching with great interest. Prime Minister Fukuda said the yenâ€™s ascent was not desirable but would not comment on intervention prospects. Data released in Japan overnight saw the January leading index upwardly revised to 36.4 from a revised 30.0. Also, the January tertiary index rose 0.7% m/m and Japan confirmed that its demand-supply gap stood a +0.7% in the October â€“ December quarter, the latest indication that deflationary pressures are continuing to ease. Monday marked exactly five years since Japan's monetary authorities last intervened on the currency markets. They have since allowed the yen to find its own level against the dollar. The Nikkei 225 stock index lost 3.71% to close at Â¥11,787.51. Dollar offers are cited around the Â¥100.65 level. The euro moved lower vis-Ã -vis the yen as the single currency tested bids around the Â¥151.80 level and was capped around the Â¥155.45 level. The British pound and Swiss franc came off vis-Ã -vis the yen as the crosses tested bids around the Â¥192.60 and Â¥98.00 figures, respectively. The Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 7.0830 in the over-the-counter market, down from CNY 7.0894, the pairâ€™s weakest close since the yuan revaluation of July 2005. Data released in China overnight saw February wholesale prices up 9.2% y/y from Januaryâ€™s 8.4% y/y increase. Peopleâ€™s Bank of China Governor Zhou said the central bank still has room to tighten monetary policy, noting Not only interest rates but also the reserve requirement have room to increase.
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