The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.80 level and was capped around the ¥90.30 level. Traders sold dollars for yen on escalating risk aversion related to the European sovereign credit crisis. Bank of Japan Deputy Governor Yamaguchi this week said recent consumer price movements have been consistent with forecasts and said the market views Japanese finances as being stable but noted the fiscal situation is very severe. Yamaguchi added the central bank is always ready to take necessary action and noted economic growth should be soft until the summer. Data released in Japan yesterday saw the February retail investor sentiment index slump 22 index points to -48. Most traders believe Japan's deflationary pressures will persist through at least fiscal year 2011. Bank of Japan this week reported the economic recovery is continuing but added there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand. BoJ also noted exports and production will continue to improve and regarding deflation, the BoJ added the year-on-year pace of decline in consumer prices...to remain more or less unchanged for the time being, and then moderate as the aggregate supply and demand balance improves gradually. The Nikkei 225 stock index lost 0.95% to close at ¥10,101.96. 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 ¥119.65 level and was capped around the ¥122.30 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥134.95 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥81.75 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8268 in the over-the-counter market, down from CNY 6.8269. People's Bank of China reported the 2010 economic situation is more severe and complicated. The Chinese government reported its recent sales of U.S. Treasuries were commendable, leading to speculation China may continue to reduce their massive war chest of U.S. assets. Last week, People's Bank of China reconfirmed it will gradually guide monetary conditions back to normal levels from the counter-crisis mode.