Yen weakens on talk of
Japanese snap election
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[November 13, 2014]
By Anirban Nag
LONDON (Reuters) - The dollar rose towards
a recent seven-year high against the yen on Thursday, driven by renewed
speculation that Japanese Prime Minister Shinzo Abe will call a snap
election in December.
The dollar's rise, though, slowed in the European session after New
York Federal Reserve President William Dudley said any premature
tightening in monetary policy could hurt economic recovery.
The dollar was up 0.2 percent at 115.65 yen, not far from the
seven-year high of 116.11 yen struck on Tuesday. The euro too rose
0.4 percent to 144.15 yen while the high-yielding New Zealand dollar
hit a seven-year high against the yen as the Japanese currency
continued to cede ground.
An election is seen returning Abe to power with a bigger mandate,
which analysts believe would allow him to implement a second round
of reflationary policies and possibly delay a planned sales tax
hike. That has spurred a rally in Japanese stocks <.N225> and
weighed on the yen.
"Dollar/yen is headed higher and all those who missed the bus at
lower levels will use the political developments to build long
dollar positions," said Geoff Yu, strategist at UBS.
A senior figure in Abe's ruling party told reporters it appeared the
premier had decided to call an election. Abe is expected to make his
decision depending on the strength of economic indicators, with
third-quarter gross domestic product data due on Monday.
The market was also awaiting U.S. jobless claims data on Thursday
and retail sales on Friday. Those numbers may reinforce perceptions
that the U.S. economy is doing better than Europe or Japan, helping
to push the dollar higher against the euro and the yen.
The Australian dollar fell after an official at the Reserve Bank of
Australia (RBA) said it had not ruled out intervening to sell the
currency, which it views as overvalued. The Aussie recovered later
to trade at $0.8745, but traders were cautious.
"If the general dollar strength does not ensure that the Australian
dollar is capped then the RBA will no doubt do so," said Thu Lan
Nguyen, a currency strategist at Commerzbank.
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The Swiss franc also remained on intervention watch.
The franc has hit two-year highs against the euro this week as
traders positioned for a Nov. 30 referendum on whether the central
bank should be required to hold at least 20 percent of its assets in
gold, although polls show voters are likely to vote against the
The Swiss National Bank has said that a 'Yes' vote would limit the
central bank's ability to maintain a stable currency.
The franc hit a new two-year high of 1.20175 francs per euro on
Thursday, not far from the cap of 1.20 francs that the SNB imposed
more than three years ago.
Vice Chairman Jean-Pierre Danthine said on Thursday that the cap
would be in place for the foreseeable future.
(Editing by John Stonestreet and Susan Fenton)
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