Dollar drops as fiscal cliff avoided

The markets are looking to riskier assets as the yen and dollar drop and the US avoids the so called fiscal cliff. Tax increases have been agreed to by Congress that will hit the nation’s wealthy.

The agreement will mean the US will now not fall into recession. The euro is currently at its highest level against the yen since July 2011 and has settled at 115.65 yen after hitting a high of 115.995 yen.

The yen began to slide as it became obvious the US was going to avoid a fiscal cliff of spending cuts and tax hikes. According to one Japanese bank trader, equities are doing well in Asia as the value of the yen falls across the board.

The US dollar has also risen against the Japanese currency to its highest level since July 2010. The greenback was trading at 87.30 yen at one point. The yen has been dogged by promises made by Prime Minister Shinzo Abe that he will introduce monetary easing as a way of combating deflation.

This has encouraged the thirst for riskier assets on the markets. The US dollar, normally seen as a safe haven bet fell against the euro. The single currency has risen by 0.5 per cent to hit $1.3266. The Australian dollar is also up to $1.0461, a rise of 0.6 per cent.