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CORRECTED-FOREX-Yen on defensive before Japanese election
July 19, 2013 / 8:46 AM / in 4 years

CORRECTED-FOREX-Yen on defensive before Japanese election

(Corrects dollar/yen level in 3rd paragraph to 100.27 yen from
101.27)
    * Dollar near one-week high against yen ahead of upper house
election
    * Japanese PM Abe's party expected to win
    * Abe victory would add momentum to economic programme, push
yen lower

    By Anooja Debnath
    LONDON, July 19 (Reuters) - The dollar held close to a
one-week high against the yen on Friday ahead of Japan's upper
house election this weekend, which could add momentum to Prime
Minister Shinzo Abe's aggressive economic reform drive.
    Opinion polls show Abe's ruling bloc is on track to take a
hefty majority. That result would give him more freedom to push
his agenda of monetary easing, public spending and structural
reform, which could weigh on the yen.
    The dollar was down 0.1 percent at 100.27 yen, still
close to the one-week high of 100.87 yen hit earlier in the
session. A large option expiry was reported at 101.50 yen and
could keep the currency pinned to that level. The dollar is up
more than 15 percent against the yen on the year.
    "Everybody expects Abe to gain a majority in the upper house
and strengthen his position and policy ... that would leave the
door open for more easing if needed and see dollar/yen rise,"
said Niels Christensen, FX strategist at Nordea.
    Earlier in the session, the yen rose after Japan's benchmark
Nikkei slipped. A fall in equities can increase risk
aversion and spark demand for the yen - a traditional safe-haven
currency.
    Such gains have, however, been fleeting as the yen stayed
vulnerable to the Bank of Japan's massive monetary expansion,
while the dollar has been supported by expectations that the
U.S. Federal Reserve could start scaling back its stimulus.
    The dollar had been boosted by higher U.S. bond yields
 but doubts over when the Fed will start withdrawing
stimulus have kept it clear of three-year highs struck on July
9. 
    The dollar index was down 0.1 percent at 82.672,
above a three-week low of 82.342 set on Wednesday.
    Traders said, with expectations so high, anything less than
a sweeping victory by Abe's ruling bloc could lift the yen.
    The euro was flat at 131.60 yen, not far from a
seven-week high around 132.10 yen hit earlier on Friday on
trading platform EBS. Against the dollar, the euro edged up 0.2
percent to $1.3136.

 (Additional reporting by Masayuki Kitano in Singapore; Editing
by John Stonestreet)

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