Investing.com - The dollar pushed higher on Wednesday, rising to seven year highs against the yen after the Republican Party won control of the Senate in the U.S. mid-term elections, raising hopes for an end to political deadlock in Washington.
USD/JPY rose 0.73% to 114.43, the most since December 2007, recovering from Tuesday’s lows of 113.15.
The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.23% to 87.37, not far from Monday’s four-year highs of 87.54.
Republicans took control of the U.S. senate, riding a wave of voter dissatisfaction with President Barack Obama’s party at the polls.
The yen showed little reaction to a speech by Bank of Japan Governor Haruhiko Kuroda, who said that a weak yen has various positive effects on the Japanese economy.
The Japanese currency fell to seven month lows against the euro, with EUR/JPY adding 0.65% to trade at 143.40.
The single currency was slightly lower against the dollar, with EUR/USD slipping 0.14% to 1.2524, holding above Monday’s two year lows of 1.2437.
Investors were looking ahead to the outcome of the upcoming European Central Bank meeting on Thursday after the BoJ’s surprise stimulus move on Friday fuelled expectations that the ECB will soon follow suit.
The European Commission cut its growth and inflation forecast for the euro zone on Tuesday, adding to pressure on the ECB to take additional steps to bolster growth.
The commission cut its forecast for economic growth in the 18 nation euro zone to 0.8% this year, from 1.2% in the spring. It expects the economy to grow by 1.1% in 2015, down from 1.7% previously.
The EC said it expects inflation in the euro area to remain below the ECB’s target of close to but just below 2% until at least 2016. It also warned that unemployment levels will remain at their current high levels for longer than previously hoped.