Investing.com - The U.S. dollar hit fresh seven-year highs against the yen on Tuesday, as demand for the yen remained under broad selling pressure a day after ratings agency Moody’s downgraded Japan's sovereign debt rating.
USD/JPY hit 119.27 during European afternoon trade, the pair's highest since August 2007; the pair subsequently consolidated at 119.24, up 0.72%.
The pair was likely to find support at 117.69, the low of November 28 and resistance at 119.85.
The yen weakened on Monday after ratings agency Moody’s downgraded Japan's sovereign debt rating by one notch to A1.
The ratings agency cited “heightened uncertainty” over Japan’s ability to cut its fiscal deficit following a decision by Prime Minister Shinzo Abe to delay a planned sales tax increase.
The yen has also been under pressure since the Bank of Japan unexpectedly expanded its stimulus program in late October. In contrast, the Federal Reserve wound up its asset purchase program in October and is weighing whether or not the economy is strong enough to start raising interest rates next year.
Prime Minister Abe dissolved parliament earlier this month, clearing the way for elections to be held on December 15 to seek a fresh mandate for his economic policies, which call for a weaker yen. The decision came after data showing that Japan’s economy unexpectedly fell into recession in the third quarter.
The yen was also lower against the euro, with EUR/JPY rising 0.28% to 148.02.
In the euro zone, official data showed that the number of unemployed people in Spain declined by 14,700 in November, compared to expectations for an increase of 57,300, after a 79,200 rise in October.