Investing.com - The yen fell to two-week lows against the dollar on Tuesday as hopes for fresh economic stimulus in Japan sharpened risk appetite, while the pound rose around 1% as political uncertainty in the U.K. eased.
USD/JPY hit highs of 103.62, the most since June 24 and was last at 103.01.
The pair rose 2.2% on Monday, the largest one-day percentage gain since October 2014.
The yen weakened after Japanese Prime Minister Shinzo Abe’s ruling coalition increased its majority in the upper house in parliamentary elections on Sunday.
The win for Abe’s coalition fed hopes for a fresh package of stimulus measures to spur economic growth.
The yen had risen to multi-year highs in recent weeks as Britain’s shock vote to exit the European Union sparked fears over the outlook for the global economy.
Meanwhile, the pound strengthened against the dollar, with GBP/USD climbing 1.06% to 1.3125, pulling back from the post-Brexit 31-year low of 1.2794 set last Wednesday.
Sterling found support as Theresa May emerged to succeed Prime Minister David Cameron, removing some of the political uncertainty that has hit the currency in the wake of the Brexit vote.
But the outlook for the pound remained clouded amid mounting expectations for a rate cut from the Bank of England at the conclusion of its policy meeting on Thursday.
The BoE could potentially cut interest rates to fresh record lows and step up quantitative easing measures to cushion the U.K. economy from the fallout from Brexit.
The BoE has said it expects the economy to suffer a material slowdown because of the uncertainty caused by the vote to leave the EU.
BoE Governor Mark Carney was to testify on the financial stability report published by the bank last week before Parliament's Treasury Committee later Wednesday and was expected to face questions on the economic impact of Brexit.
The euro was also higher against the dollar, with EUR/USD up 0.5% at 1.1111.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.46% at 96.14.