The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.25 level and was supported around the ¥91.55 level. Prime Minister Hatoyama reported the employment and current situation still requires us to remain alert. Hatoyama failed to provide specifics as to how his Democratic Party of Japan administration would reduce Japan's escalating public debt. Other media outlets have joined Nikkei in reported Bank of Japan believes deflationary pressures will remain in Japan through at least 2011. The central bank now sees core consumer prices excluding fresh food falling 0.5% in the year starting 1 April 2011 with economic growth ramping up to 1.2%. It remains probable the central bank will not increase interest rates anytime soon. The discontinuation of BoJ's emergency liquidity programs is sleighted for the end of December and any indication of a change in that time frame could impact the yen. It is also possible the BoJ will indicate its schedule for these changes as early as this week. In addition, Japan's Policy Board may release its latest round of economic forecasts this week. The Nikkei 225 stock index climbed 0.77% to close at ¥10,232.62. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥136.80 level and was capped around the ¥138.45 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥149.15 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥90.30 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8275 in the over-the-counter market, up from CNY 6.8245. The pair moved higher after Zhou Hai, a division chief at People's Bank of China in Harbin, released a report indicating the central bank should sell dollars for euro and yen and diversify its massive foreign reserves portfolio. While this represented Zhou's personal opinion and not PBoC policy, it was enough to move the markets, especially given the size of China's massive US$ 2.273 trillion foreign reserve war chest. There remains widespread speculation the central bank will accelerate the removal of monetary stimuli and liquidity from the system, possibly resulting in further yuan appreciation.
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