The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.50 level and was supported around the ¥91.30 level. Liquidity was reduced on account of a Japanese market holiday that will keep liquidity reduced through Thursday. The yen continues to enjoy a positive interest rate differential over the U.S. dollar with the latter now acting as a funding currency given its record low levels. Three-month US$ Libor was fixed today at 0.28938 with three-month yen Libor fixed at 0.34875. Bank of Japan Governor Yamaguchi last week reported that maintaining emergency credit programs for a long time...may hurt an autonomous recovery of market functions and invite the distortion of the allocation of resources. He added, however, that a positive mechanism has started to take hold in the Japanese economy. The central bank voted to keep monetary policy unchanged last week and upgraded its assessment of the economy. New finance minister Fujii last week verbally intervened saying exchange rates should be determined by the state of a nation's economy. His comments suggest the new Democratic Party of Japan government may not be inclined to sell the yen through actual intervention. The Nikkei 225 stock index on Friday lost 0.70% to close at ¥10,370.54. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥135.50 level and was supported around the ¥134.15 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.60 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.25 level. In Chinese news, the U.S. dollar gained ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8299 in the over-the-counter market, up from CNY 6.8291. China may purchase some of the 403.3 metric tons of gold being offered for sale by the International Monetary Fund to diversify its reserves. People's Bank of China reported it will adjust monetary policy at an appropriate time. There is speculation among dealers that Chinese monetary authorities may allow the yuan to appreciate further vis-à-vis the U.S. dollar.