Dollar surges on Japan vote, U.S. budget weighs

Mon Dec 17, 2012 8:18am EST
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By Richard Hubbard

LONDON (Reuters) - A win by Japan's conservative Liberal Democratic Party lifted the dollar to a 20-month high against the yen on Monday, while uncertainty over the prospects for a U.S. budget deal sent European shares lower.

U.S. stock index futures pointed to mixed open on Wall Street where tech giant Apple's shares (AAPL.O: Quote) will be in the spotlight because of sharp falls in pre-market trade after Citigroup cut its rating for the stock. .N

The biggest moves of the day came in the currency market following a landslide election victory for Japan's LDP on Sunday which opened the way for a shift in economic strategy designed to lift the world's third largest economy out of recession.

The triumph was seen as piling pressure on the Bank of Japan to ease further at its next policy meeting, which ends on Thursday, setting the stage for an even bigger fall in the yen.

"I wouldn't be surprised if we were talking about, in March or April time, a move that has taken us up into the mid-nineties (for dollar/yen)," said Simon Derrick, chief currency strategist at Bank of New York Mellon.

"I think when it moves it's quick and I think it's going to happen."

The dollar was up 0.3 percent on the day at 83.70 yen, having earlier hit 84.48 yen after the election result became clear, its strongest level since April 2011.

The yen's fall also boosted the euro, which jumped to around 111.30 yen, its highest since late March and near its year's high of 111.43 yen.   Continued...

A visitor walks near the logo of the Tokyo Stock Exchange in Tokyo November 5, 2012. REUTERS/Issei Kato