Yen dangles near seven-month low versus dollar

The yen hovered near a seven-month low against the dollar on Tuesday and was likely to stay under pressure in the near term, dealers said, amid mounting political calls for more aggressive monetary expansion. The yen showed little reaction after the Bank of Japan held off from additional monetary stimulus, in line with expectations, after having eased in September and October.
The dollar last traded at 81.28 yen, down 0.1 percent from late US trade on Monday. The greenback was within sight of the previous day's high of 81.59 yen, the dollar's highest level versus the yen since late April. The yen has slid over the past week on market expectations that a likely new Japanese government after a December election would push the BoJ toward more forceful monetary stimulus, and analysts said the dollar may have more room to rise against the Japanese currency in the near term. "I think we are going to see new highs," said Todd Elmer, currency strategist at Citi in Singapore, referring to the dollar's outlook versus the yen. "We are going to break out of the topside of the range around 82. The risk is that we could extend a little beyond that point."
It may be prudent, however, to be cautious about selling the yen based solely on BoJ easing expectations, Elmer said. Japan's opposition Liberal Democratic Party (LDP), which has a commanding lead in opinion polls ahead of the election on December 16, has become increasingly vocal in its calls for more monetary stimulus.
Shinzo Abe, the leader of the LDP, has called on the BoJ for bolder policy action, including "unlimited easing", pushing interest rates to zero or below zero and directly underwriting bonds issued to fund public works spending. Against this backdrop, the dollar may find support against the yen on any pull-back. Some Japanese importers and investors may have been caught off guard by the dollar's recent surge against the yen, said a trader for a Japanese bank in Singapore.
The euro dipped 0.2 percent to $1.2790, having eased after Moody's cut France's sovereign rating by one notch to Aa1 from Aaa, citing an uncertain fiscal outlook and deteriorating economy. The single currency's losses were limited, however. Analysts said the downgrade did not come as a surprise, with Standard & Poor's having already downgraded France in January.