The yen rose for a second day versus the dollar, extending a rally from a 29-month low, amid ebbing risk appetite and bets the currency’s three-month slide already incorporates proposed Bank of Japan stimulus measures. The yen gained versus all of its 16 most-traded peers even as Finance Minister Taro Aso said Japan will buy euro-denominated sovereign debt to help weaken the currency.

The Bank of Japan next meets Jan. 21-22. Policy makers boosted stimulus at their previous gathering in December while refraining from raising their inflation goal from 1 percent. Newly elected Prime Minister Shinzo Abe had called for a doubling of the inflation measure.

Japan will use foreign-exchange reserves to buy European Stability Mechanism bonds to help weaken the yen, Aso told reporters today in Tokyo. The decision will also help the “financial stability of Europe,” he said.

The Japanese government will watch the currency market “closely” and will strengthen cooperation with the BOJ to counter deflation, according to a draft of its emergency economic measures released today. Abe said on Jan. 1 that “bold” monetary policy was one of the three prongs of his economic plan.

The euro dropped for the first time in three days, approaching its 50-day moving average of $1.2995. The euro headed toward its 50-day moving average versus the dollar after failing to breach it for the past two days. Moving averages, which indicate momentum, are seen by some traders as potential turning points in the direction of a currency’s price.

The pound fell toward the weakest level in a month against the dollar before a Bank of England meeting this week. Policy makers are forecast to keep interest rates at a record low as they struggle to stoke a recovery. The U.K. economy shrank 0.1 percent last year, while the U.S. expanded 2.2 percent, according to a Bloomberg News surveys.

The single currency can not demonstrate substantial growth on Tuesday, as the downward pressure accompanies any attempt of its growth.

After the fall, caused by rumors that France was warned of downgrade, and achieve a new low at $ 1.3055 the single currency has recovered and now back to the $ 1.3070 amid continued risk aversion.

Earlier, the euro gained against the modest position of Finance Minister of Japan is that the country will use part of its foreign exchange reserves to buy bonds issued by the European Stability Mechanism (ESM), which is the foundation of saving the eurozone.

Amid falling yields on 10-year U.S. Treasuries USD / JPY is also reduced, reaching a minimum Y86.97, after falling 60 pips.

Yield on 10-year U.S. government bond is close to 1.85%.

Analysts note that a 1.85% fall will signal the resumption of risk aversion, which would strengthen the pair rolled on recording profits.

US January IBD/TIPP Economic Optimism Index 46.5 Vs 45.1 In December

EUR/USD $1.3100, $1.3200

USD/JPY Y87.00, Y88.00

GBP/USD $1.6040, $1.6050

USD/CHF Chf0.9260

AUD/USD $1.0400, $1.0420, $1.0500, $1.0520

AUD/NZD NZ$1.2600

EUR/USD

Offers $1.3200, $1.3190, $1.3140/50

Bids $1.3100/090, $1.3065/60, $1.3050, $1.3010/00

GBP/USD

Offers  $1.6195/205, $1.6170/80, $1.6150/55, $1.6130/35

Bids $1.6065/60, $1.6050/40, $1.6010/00, $1.5980

AUD/USD

Offers  $1.0600, $1.0550, $1.0525/30, $1.0515/20

Bids  $1.0440, $1.0425/20, $1.0410/05

EUR/JPY

Offers  Y115.50, Y114.95/00

Bids Y114.15/10, Y114.00, Y113.50, Y113.20, Y113.00

USD/JPY

Offers  Y88.35/40, Y88.15/20, Y88.00

Bids Y87.20/15, Y87.00, Y86.55/50, Y86.30/25

EUR/GBP

Offers  stg0.8220/25, stg0.8200/10, stg0.8170, stg0.8165

Bids stg0.8125/20, stg0.8105/00, stg0.8080, stg0.8065/60, stg0.8045

EUR/USD $1.3100, $1.3200

USD/JPY Y87.00, Y88.00

GBP/USD $1.6040, $1.6050

USD/CHF Chf0.9260

AUD/USD $1.0400, $1.0420, $1.0500, $1.0520

AUD/NZD NZ$1.2600

00:01United Kingdom BRC Retail Sales Monitor y/yDecember +0.4%+0.7%+0.3%

00:30Australia Trade BalanceNovember -2.09-2.21-2.64

The yen headed for its biggest two- day gain since November, extending a rally from its 2 1/2 year low on speculation recent declines were excessive.

The currency strengthened against all of its 16 major counterparts even amid prospects Japanese Prime Minister Shinzo Abe will press the central bank to expand monetary stimulus at a Jan. 21-22 meeting in an effort to revive growth. The yen’s 14-day relative strength index against the dollar was at 25 today, below the 30 level that some traders view as a signal that an asset’s price has fallen too fast. The similar gauge for the yen versus the euro was at 30.

The euro maintained two days of gains versus the dollar amid speculation the European Central Bank will refrain from cutting borrowing costs this week. The ECB meets Jan. 10 and will keep its main refinancing rate at a record low of 0.75 percent, according to the median estimate of 55 economists in a Bloomberg News survey.

Data today may show the euro-area jobless rate rose to 11.8 percent in November from 11.7 percent in October, according to the median estimate of economists in a Bloomberg News poll. That would be the highest since the currency bloc was formed.

Australia’s dollar weakened against all of its 16 most- traded peers after the nation’s statistics office said imports outpaced exports by A$2.64 billion ($2.77 billion) in November. That compared with a revised A$2.44 billion shortfall in October and was the biggest deficit since March 2008.

EUR / USD: during the Asian session, the pair rose to $1.3140.

GBP / USD: during the Asian session, the pair traded in the range of $1.6100-30.

USD / JPY: during the Asian session the pair fell to Y87.20.

One of the highlights today sees German Chancellor Angela Merkel, Greek Prime Minister Antonis Samaras and Spanish Finance Minister Luis de Guindos take part in conference hosted by Die Welt, in Berlin. Merkel is also due to hold bilateral talks with the Greek PM. There is a raft of EMU data due for release at 1000GMT, including November retail trade, December economic sentiment numbers, December business climate indicator and the November unemployment rate. At 1100GMT, German November manufacturing orders will cross the screens, with consensus forecasts looking for a fall of 1.4% m/m.

(pare/closed(00:00 GMT +02:00)/change, %)

EUR/USD$1,3115 +0,27%

GBP/USD $1,6115 +0,25%

USD/CHF Chf0,9211 -0,30%

USD/JPY Y87,78 -0,42%

EUR/JPY Y115,13 -0,12%

GBP/JPY Y141,44 -0,16%

AUD/USD $1,0502 +0,19%

NZD/USD $0,8370 +0,63%

USD/CAD C$0,9858 -0,10%

00:01United Kingdom BRC Retail Sales Monitor y/yDecember +0.4%+0.7%

00:30Australia Trade BalanceNovember -2.09-2.21

06:45Switzerland Unemployment RateDecember 3.0%3.0%

07:00Germany Trade BalanceNovember 15.215.9

07:00Germany Current AccountNovember 13.616.0

07:45France Trade Balance, blnNovember -4.7-4.8

10:00Eurozone Retail Sales (MoM)November -1.2%+0.5%

10:00Eurozone Retail Sales (YoY)November -3.6%-2.1%

10:00Eurozone Unemployment RateNovember 11.7%11.8%

10:00Eurozone Business climate indicatorDecember -1.19-1.08

10:00Eurozone Industrial confidenceDecember -15.1-14.5

11:00Germany Factory Orders s.a. (MoM)November +3.9%-1.4%

11:00Germany Factory Orders n.s.a. (YoY)November -2.4%-0.4%

21:30U.S. API U.S. Crude Oil Inventories- -12

21:45New Zealand Building Permits, m/mNovember -1.5%