The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥89.25 level and was supported around the ¥88.15 level. Dealers cited semi-official buying of the pair below the ¥88.75 level, an indication the government may be trying to keep the yen from appreciating further. The Japanese government reportedly increased its allowance for foreign exchange intervention in the draft budget for its next fiscal year that starts at the end of this month. Some dealers suggest the new government may have as much as ¥145 trillion with which to intervene. Bank of Japan Policy Board member Noda reported Maintaining fiscal discipline, in other words showing a road map and implementing it decisively in a timely manner, is critical to keep interest rates low. This is the latest indication that the verbal sparring between the central bank and government continues. Noda also added deflation will continue through fiscal year 2011 and said overseas economies are Japan's largest risk factor. The Nikkei 225 stock index climbed 1.05% to close at ¥10,145.72. 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 ¥120.25 level and was capped around the ¥121.80 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥134.80 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.20 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8264 in the over-the-counter market, up from CNY 6.8250. Options traders have become considerably bullish on the prospect on additional yuan appreciation. PBoC is expected to raise banks' reserve requirements further this year. The government also reported new bank lending exceeded CNY 70 billion in February.