FOREX-Yen sinks to lowest since April 2011

27/12/2012 14:18 AST

The yen sank to a 20-month low in Asian trading on Wednesday, as Shinzo Abe prepared to assume Japan's helm with a mandate to weaken its currency and push for more drastic monetary and fiscal stimulus.

Overall activity was thin, after most global financial centres were closed for the Christmas holiday. All G10 markets except Japan were closed on Tuesday, and only Japanese and U.S. markets were to open on Wednesday.

The dollar rose as high as 85.38 yen on the EBS trading platform, its highest since April 2011, and last stood at 85.27 yen. Resistance is seen at its April 2011 nadir of 85.53 yen.

Abe, whose party won a landslide victory in a Dec. 16 election, will be sworn in as premier on Wednesday, and is expected to pick a slate of close allies to serve in his government.

On Tuesday, he reiterated that he seeks to tame the strong yen to help revive Japan's economy.

"There is no reason to expect the trend to change anytime soon, with no incentive to buy the yen now," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.

"Of course, on an intraday basis, there could be spells of profit-taking, but overall, there is no compelling reason that would make it necessary to buy the yen," he said.

Abe has also called for aggressive monetary easing by the Bank of Japan combined with massive fiscal spending.

Minutes of the BOJ's November policy meeting released on Wednesday revealed that some board members said the bank must act decisively, without ruling out any policy options, if the outlook for the economy and prices worsens further.

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Reuters