The dollar was solid just below the
85-yen threshold in Tokyo trading on Tuesday, as Liberal Democratic
Party leader Shinzo Abe, expected to be named Japanese prime
minister on Wednesday, further stirred up expectations of aggressive
monetary easing in Japan.
At 5 p.m., the dollar was quoted at 84.79-83 yen, up from 83.97- 84.00 yen at the same time on Friday, the previous market day in Tokyo. The euro was at 1.3183-3188 dollars, slightly down from 1.3198-3198 dollars, and at 111.85-86 yen, up from 110.83-85 yen.
The yen took a dive in overseas trading on Monday, when the Tokyo market was closed for a national holiday, following Abe's remarks on the weekend that he would aim to revise the Bank of Japan law if the central bank stops short of introducing an inflation target of 2 pct, as proposed by Abe, in its next policy meeting in January.
His calls for stronger monetary easing by the BOJ have dragged down the yen against other major currencies since the LDP won a landslide victory in the Dec. 16 House of Representatives election.
The dollar advanced to a fresh 20-month high above 84.90 yen in Oceanic trading on Tuesday, but its topside was capped in Tokyo trading, due to selling by Japanese export companies as well as profit-taking, traders said.
"The dollar remains on a solid tone versus the yen, while there is limited selling to cover yen-short positions," an official at a foreign financial firm said.
Abe underpinned the dollar versus the yen by reiterating at a meeting of the Japan Business Federation, or Keidanren, later on Tuesday that he aims to conclude a policy accord between the government and the BOJ to bind the central bank to a 2 pct inflation target.
It would be natural to rectify the yen's strength through monetary policy, he also said.
While overseas traders are inactive on Christmas holidays, "there is a prevailed mood to sell the yen," an analyst at a major Japanese bank said. "The dollar could rise above 85 yen in the near term."
According to market sources, dollar-selling orders are lined up between 85 yen and 85.50 yen.
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