Asian session: The yen traded near a 2 1/2 year low

The yen traded near a 2 1/2 year low as speculation grew that Japan’s Prime Minister Shinzo Abe will ramp up efforts to spur growth, paring demand for refuge assets. The Japanese government will announce around 12 trillion yen ($136 billion) in fiscal stimulus this month to boost the nation’s shrinking economy, the Yomiuri newspaper said today. The extra budget for this fiscal year through March will include 5-6 trillion yen of public works spending, the report said, without saying where it obtained its information.

The Dollar Index gained for a fourth day before Richmond Federal Reserve President Jeffrey Lacker speaks tomorrow in Columbia, South Carolina. Minutes released last week of the U.S. central bank’s latest meeting showed policy makers may curtail monetary stimulus this year. Lacker said on Jan. 4 further monetary stimulus is unlikely to boost growth and will “test the limits” of the U.S. central bank’s credibility. “At some point, we will need to withdraw stimulus by raising interest rates and reducing the size of our balance sheet,” he said in prepared remarks to the Maryland Bankers Association in Baltimore.

Demand for the euro was limited before data which may show unemployment in the 17-nation currency block increased. Jobless rate probably rose to 11.8 percent in November from 11.7 percent in the previous month, according to the median estimate of economists surveyed by Bloomberg News before the data tomorrow.

EUR/USD: during the Asian session the pair fell to $1.3025.

GBP/USD: during the Asian session the pair fell below $1.6020.

USD/JPY: during the Asian session the pair fell below Y88.00.

It is a quiet start to the start to the week, with limited data expected from the UK and the eurozone. There is a slightly fuller US schedule, but the data is largely second tier. However, the pace will pick up as the week progresses and more people get back in the swing following the year-end holidays, building towards the ECB and BOE policy meets later in the week. On the continent, at 0930GMT, the Sentix confidence data is released. Then, at 1000GMT, the EMU November PPI data will be released, with analysts looking for 0.2% m/m and +2.4% y/y. The calendar starts in the UK with the release of the UK Halifax December House Price Index at 0800GMT.