The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥92.30 level and was capped around the ¥93.20 level.  The pair gained 2.63% in 2009.  Continued evidence of a global economic recovery reduced demand for U.S. dollars and elevated demand for higher-yielding assets.  There has been a resumption of last year's negative correlation between equity markets and the U.S. dollar during the first full day of trading in 2010.  In December, that paradigm was shifted as the U.S. dollar rallied on positive U.S. economic news and these rallies were coincident with improvements in U.S. equities prices.  Some dealers believe the late-2009 rally in the greenback may have simply been traders covering dollar shorts and booking profits.  Notably, U.S. mutual funds reduced foreign holdings to 25.8% of total holdings in November from about 26% in October, a level that matched the record established in May 2008.  A further reduction in foreign holdings could increase demand for the U.S. dollar.  Japan's gross domestic product fell to an annualized ¥471 trillion in the third quarter of 2009, the lowest level since 1991.  The finance ministry is now predicting Japan's tax revenue will decline to at least a 25-year low in 2010.  Dealers are also paying very close attention to plans for the government's budget in 2010 that does little to reduce record deficits.  Japan's Aa2 credit rating may be imperiled if fiscal conditions do not improve.  Japan currently has about US$ 8.96 trillion in Japanese government bonds outstanding, outweighing the U.S.'s US$ 8.78 trillion in federal debt.  Current forecasts suggest Japan's fiscal deficit would remain as high as 8% of GDP in 2014, a sharp contrast to a 6.7% forecast for the U.S. and talk of a balanced budget in Germany.  Notably, Japan's GDP is estimated to reach 246% of gross domestic product in 2010, compared to about 108% for the U.S. and 89% for Germany.  The Nikkei 225 stock index climbed 1.03% to close at ¥10,654.79.  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 ¥133.80 level and was supported around the ¥132.35 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥150.70 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.00 figure. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8273 in the over-the-counter market, up from CNY 6.8270.  People's Bank of China Governor Zhou last week reported 2010 is a crucial year in strengthening the stabilization and recovery of the economy and defeating the international financial crisis.  People's Bank of China reported China's foreign reserves management will face a larger challenge in 2010.  PBoC reaffirmed it will gradually proceed with exchange rate reform.  Today, PBOC official Sheng Songcheng reported China should invest its foreign exchange reserves in oil and other important resources.  Data released in China today saw December manufacturing PMI improve to 56.1, its sharpest gain in more than give years.