Investing.com - The dollar pushed higher against the yen on Tuesday, closing in on the seven year peaks hit in the previous session in the wake of a downgrade to Japan’s sovereign debt rating.
USD/JPY was up 0.23% to 118.66, not far from Monday’s highs of 119.13, the strongest level since August 2007.
The yen initially fell against the dollar on Monday before regaining some ground, 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 weakened broadly since the Bank of Japan unexpectedly expanded its stimulus program in late October. In contrast, the Fed 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 euro dipped against the dollar, with EUR/USD edging down 0.11% to 1.2456, as investors remained wary ahead of Thursday monetary policy meeting of the European Central Bank.
Data last week showing that the annual rate of euro area inflation slowed to a five year low of 0.3% last month and Monday's weak factory data added to pressure on the central bank to step up measure to spur growth and inflation.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.14% to 88.13.