* Yen hits 2-year low vs dlr, lowest since Aug 2011 vs euro
* Dollar/yen on track to end above 200-week moving average
* Ongoing "fiscal cliff" stalemate underpins dollar
By Lisa Twaronite and Masayuki Kitano
TOKYO/SINGAPORE, Dec 27 The yen fell to its
lowest level in more than two years against
the dollar on Thursday, reflecting expectations that the new
government of Prime Minister Shinzo Abe will push to weaken
Japan's currency and implement aggressive stimulus.
The dollar rose to as high as 85.87 yen on trading platform
EBS, its highest level since September 2010. The greenback last
stood at about 85.77 yen, up 0.2 percent from late U.S.
trade on Wednesday.
The dollar is well on track to close above its 200-week
moving average, now at roughly 84.95 yen, for the first time
since the week ending Dec. 23, 2007.
The yen also fell against the euro, touching its lowest
level in nearly 17 months. The euro rose to as high as 113.65
yen, the single currency's strongest level against
the yen since early August of 2011.
Abe, who has threatened to revise a law guaranteeing the
Bank of Japan's independence if it refuses to set a 2 percent
inflation target, appointed a cabinet of close allies on
"There appears to be widespread agreement within the new
government and its political alliances on the path to take. The
majority seems to be willing to back Abe's call for 'bold
monetary easing' and a 2.0 percent inflation target for the
BOJ," strategists at Brown Brothers Harriman wrote in a note to
New Finance Minister Taro Aso said on Thursday that Abe has
ordered him to compile a stimulus package without adhering to a
previously agreed cap on new bond issuance.
New Economics Minister Akira Amari said on Thursday the yen
was heading toward appropriate levels with its recent weakening,
and that it was important to maintain the downward trend.
Japan's currency is poised for a drop of more than 11
percent versus the dollar in 2012, its biggest fall since 2005,
with most of the move coming after Abe was elected leader of his
Liberal Democratic Party in September.
The yen's drop, which improves the trade competitiveness of
Japanese exporters, has given a boost to Japanese equities.
Japan's benchmark Nikkei share average hit a 21-month high on
Thursday and has climbed 22 percent for the year, putting it on
track for its best yearly gain since 2005.
"I'm still bullish on the dollar/yen quite a bit," said a
trader for a U.S. bank in Singapore.
"In this thin market, I think anything can happen. But
definitely I wouldn't go against the trend. The trend is quite
clear at this point in time," he added.
One factor that could further weigh on the yen is the
potential for currency hedging by non-Japanese investors with
exposure to yen assets such as Japanese equities, he said.
"I think there will be some sort of assessment of their
hedging policies. I'm not sure everyone is fully hedged," the
On technical charts, one possible resistance for the dollar
lies near 86.84 yen, the 23.6 percent retracement of the
greenback's drop from its June 2007 high of 124.14 yen to its
record low of 75.311 yen set in October 2011.
Concerns that the U.S. Congress might fail to reach a deal
before Jan. 1 to avert the "fiscal cliff" of $600 billion of
spending cuts and tax hikes have bolstered the dollar as a
The euro traded at $1.3228, up 0.1 percent from late
U.S. trade, but still below an 8-month high of $1.33085 hit last
The dollar index stood at 79.603, staying
above a two-month low of 79.008 hit last week.