The story just keeps expanding at the margins, with little change in the plot. With nothing positive coming out of Japan, the weakened economy continues to cause a steady devaluation of the yen against other major currencies. While both the dollar and euro are gaining against the yen, the dollar is pushing ahead of the euro.

The

Nikkei 225

stock index remains mired near 16-year low, but it ended its most recent trading session higher. The Nikkei has fallen a strong 6.5% in the past month, reflecting the soured economy and lack of faith in both the equity markets and the government to sustain them.

"The fundamentals continue to be quite negative for the yen," said James McCormick, currency strategist at

J.P. Morgan Chase

. While he believes the dollar/yen upside risk remains substantial, "though the market does look to be a bit overbought in dollar/yen."

Overbought or not, the yen continues to slide in value, remaining grounded near 20-month lows against the dollar. Having broken through the key 120 yen resistance level just days ago, the dollar is still pushing up strongly, wedging its way through the 122 yen per dollar level. It peaked at 122.11 yen.

The dollar has since slipped back a bit, most recently trading for 121.92 yen per dollar, up from yesterday's closing price of 121.13 yen.

The euro also continues to creep up on the dollar today, but has not made the same strong and consistent gains on the yen as the dollar in recent trading. The euro was up most recently today at 110.55 yen per euro, having closed slightly lower yesterday, at 110.25 yen.

Meanwhile, the "dollar performance versus the euro is looking pretty impressive considering the fundamentals," McCormick said. "The market is happy enough to continue buying dollars as long as the story remains a pretty isolated manufacturing sector recession."

The euro was last trading down at $0.9065, having closed yesterday at $0.9107.

The Australian dollar continues to wallow in its own misery, trying to capture the spotlight with its own sliding economy and depreciating currency.

"Asia is the most vulnerable to the global downturn," McCormick said. "And Australia is taking the brunt of that." The Aussie buck is trading at record lows again today, as its been hitting new lows all week. The Australian dollar was recently trading for $0.4939, having slipped below the key 50-cent level just this week. The Aussie dollar closed yesterday at $0.4953.

The

European Central Bank

met again today to discuss interest rates, but decided to leave the key rates unchanged, as expected. This has had little effect on trading of the British pound. It was most recently trading for $1.4426, down from yesterday's close of $1.4447.

The Canadian dollar remains in a tight range against its U.S. counterpart, slipping just slightly in value. The U.S. dollar was recently trading for C$1.5578, up just marginally from C$1.5572 yesterday.

On a cautionary note, McCormick warned that "it's a very fast market -- you want to be careful trying to call a bottom or top" on any currency trends. "We're probably not as far from fair value as most analysts think."

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