Investing.com - The U.S. dollar rose to fresh seven-year highs against the yen on Wednesday a day after Japanese Prime Minister Shinzo Abe delayed a planned sales tax hike and called early elections.
USD/JPY hit highs of 117.44, the most since October 2007 and was last at 117.34, 0.41% higher for the day.
The yen remained under pressure after Prime Minister Abe announced Tuesday plans to delay a sales tax hike due to take place next year after an increase in April played a part in pulling Japan into a recession.
He also called elections for December, to seek a fresh mandate for his economic policies, which call for a weaker yen.
The decision came after data showed that Japan’s economy fell back into recession in the third quarter, contracting by an annualized 1.6% after a 7.3% contraction in the previous quarter.
The yen showed little reaction after the Bank of Japan left monetary policy on hold on Wednesday, as widely anticipated.
The yen fell to fresh six-year lows against the euro, with EUR/JPY up 0.39% to 147.01.
The euro gained ground on Tuesday after a stronger-than-forecast German ZEW economic sentiment index bolstered the outlook for the euro zone’s largest economy.
Expectations for more stimulus measures from the European Central Bank remained high after President Mario Draghi said earlier this week that it could expand its asset purchase program to include government bonds.
Elsewhere, the euro dipped against the dollar, with EUR/USD slipping 0.09% to 1.2520.
The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, was up 19% to 87.80, holding below last week’s more than four-year highs of 88.36.
Investors were looking ahead to the minutes of the Federal Reserve’s latest policy meeting later Wednesday for further indications on the strength of the U.S. economy and the future possible direction of interest rates.