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Dollar hits 29-month high of ¥86.64

JIJI

The dollar rose further to 29-month highs around ¥86.50 in Tokyo trading Friday, backed by unflagging hopes for bold fiscal spending and monetary easing under the new government.

At 5 p.m., the greenback was quoted at ¥86.30-31, up from ¥85.64-64 at the same time Thursday. The euro was at $1.3249-3253, little changed from $1.3247-3252, and at ¥114.36-38, up from ¥113.46-49.

After climbing as high as ¥86.64 — a level unseen since early August 2010 — in Oceanic trading early in the morning, the U.S. currency shed some gains due partly to monthend selling by Japanese exporters, but basically stayed on a solid tone, traders said.

Meanwhile, the euro hit the highest level since July 11, 2011, at one point. Trading grew thin in the afternoon ahead of the year’s end and New Year’s vacations.

Despite growing caution over the dollar’s recent rapid rally against the yen, it was underpinned against the Japanese currency by “persistent hopes that the yen’s strength will be corrected under the administration of Prime Minister Shinzo Abe,” said an analyst at a major Japanese bank. “The dollar has resisted falling back, with the ¥90 level seen by the market as a goal for the yen’s correction.”

Shigeru Ishiba, secretary general of Abe’s Liberal Democratic Party, has recently said that it would be desirable for the dollar to trade in a range between ¥85 and ¥90.

“The Bank of Japan is expected to face pressure to loosen monetary policy, as the new government is calling for a 2 percent inflation goal,” said Rikiya Takebe of Okasan Online Securities Co.

Such expectations were boosted by a government report Friday that showed the core consumer price index for November fell 0.1 percent from a year before.