Yen on the Market

As GDI Report at yesterday that the yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥115.40 level and was supported around the ¥114.35 level. Technically, today’s intraday low was right around the 50% retracement of the move from ¥111.60 to ¥117.10. The Japanese government kept its assessment of the economy unchanged for September but downgraded its assessment for the first time in 30 months on account of weak capital spending. The government also noted “attention should be paid to effects of developments in the U.S. economy and changes in oil prices on the Japanese economy and overseas economies." On the political front, former foreign minister Aso appears to be the front runner to succeed outgoing Prime Minister Abe.

Bank of Japan
Most traders believe Bank of Japan will keep the overnight call rate unchanged at +0.50% for the next few months and possibly lift the call rate by +25bps to +0.75% by the end of the current fiscal year in March 2008. The Nikkei 225 stock index climbed 1.94% to close at ¥16,127.42. Dollar bids are cited around the ¥113.70 level. The euro came off vis-à-vis the yen as the single currency tested bids around the ¥158.75 level and was capped around the ¥160.25 level. The British pound and Swiss franc weakened vis-à-vis the yen as the crosses tested offers around the ¥230.15 and ¥96.50 levels, respectively. The Chinese yuan came off vis-à-vis the U.S. dollar as the greenback closed at CNY 7.5175 in the over-the-counter market, up from CNY 7.5105. People’s Bank of China announced it is tightening monetary policy again, effective tomorrow, by lifting deposit and lending rates by 27 bps. Data released in China today saw 2006 direct overseas investment up 73% y/y at a record US$ 21 billion. Also, urban fixed-asset investment was up 26.7% between January and August.