The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.45 level and was capped around the ¥90.65 level. Bank of Japan Deputy Governor Nishimura said the central bank may seek to reduce longer-term rates. BoJ will likely try to steer three-month TIBOR lower from its current 0.70% level. Data released in Japan overnight saw December retail sales decline 2.7% y/y, the largest slide since February 2005. Also, December wholesale prices slide 13.9% y/y, the largest decline since at least 1980. Industrial output data are due overnight and are expected to evidence a decline of 9.0%. The Japanese government announced the economy likely entered a recession in October 2007 and sees economic conditions becoming very severe. The Nikkei 225 stock index gained 1.79% to close at ¥8,251.24. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥115.95 level and was capped around the ¥119.30 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥126.50 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥77.60 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar today as the greenback closed at CNY 6.8392 in the over-the-counter market, down from CNY 6.8402. Prime Minister Wen defended his country’s exchange rate policy saying Given the current economic situation we think the exchange rate…should be kept at a reasonable and balanced level. There are strong fluctuations in exchange rates between different currencies in the world...but China is not to blame for this.
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