Dollar and euro rise against the yen

The US dollar has hit its highest level against the yen in 20 months. The drop in the value of the Japanese currency follows Monday’s election results that saw the Liberal Democratic Party voted into power by an overwhelming majority. Leaders have already said they intend to introduce aggressive monetary easing as a way of weakening the yen.

Shinzo Abe, who returns to the position of Prime Minister, said he intends to beat deflation by introducing big fiscal spending. A weaker yen will help Japanese manufacturing and exports to compete in the international markets.

Although the euro is also up against the yen, its strength has been tempered against the dollar because Mario Draghi, president of the European Central Bank, has warned that growth in the eurozone is likely to remain sluggish.

The dollar has risen 0.31 per cent against the yen to 83.70, the highest the greenback has been since April 2011. The euro hit 110.29 yen, an increase of 0.36 per cent but failed to settle at more than 0.06 up against the dollar at $1.3169 because of Draghi’s negative comments on growth.

Interest rates across Europe are expected to remain low and 2013 will see weak growth with gradual recovery predicted for the end of the year. The euro was given a slight boost by an announcement by the US Federal Reserve that it is unlikely that unemployment in America will drop below 6.5 per cent for at least three years.