Asian session: The yen fell to its weakest level since April 2011

The yen fell to its weakest level since April 2011 versus the dollar after Shinzo Abe’s Liberal Democratic Party swept to power in Japanese elections yesterday, giving him a mandate to act on pledges of expanded fiscal and monetary stimulus. The yen tumbled to an almost nine-month low against the euro after Abe’s LDP won 294 seats in the 480-member lower house of parliament, while Prime Minister Yoshihiko Noda’s Democratic Party of Japan lost three-fourths of its lawmakers, according to public broadcaster NHK. Japan’s stocks rose and government bonds slid. Abe has called for a doubling of the Bank of Japan’s inflation goal to 2 percent and unlimited easing to revive growth. The central bank, which last month refrained from expanding its 66 trillion-yen ($786 billion) asset-purchase program, is scheduled to hold a policy meeting on Dec. 19-20. Governor Masaaki Shirakawa, criticized by politicians for his perceived failure to reverse more than a decade of deflation, ends his five-year term on April 8.

The dollar was supported as uncertainty over U.S. budget negotiations boosted demand for the relative safety of the world’s reserve currency. As part of a deal with President Barack Obama to cut the deficit, House Speaker John Boehner offered to raise income tax rates on households earning more than $1 million a year in exchange for containing federal entitlement programs, according to two people familiar with the talks.

EUR/USD: during the Asian session, the pair rose to $1.3190, but later declined.

GBP/USD: during the Asian session, the pair traded between $1.6155-00.

USD/JPY: during the Asian session, the pair rose to Y84.35.

The global calendar slows down considerably this week, as markets gradually start the wind down into the festive season. However, there are still some data releases to clear away before the Christmas break. At 0800GMT, Spain' 3Q labour cost survey will be released, followed at 1000GMT with release of the EMU October trade balance and third quarter labour cost numbers. Later, ECB President Mario Draghi is set to appear before the European Parliament Economic and Monetary Affairs Committee, in Brussels, at 1430GMT.