Asian session: The yen fell to its lowest level against the euro since August last year

The yen fell to its lowest level against the euro since August last year on prospects the Bank of Japan will expand stimulus at a policy meeting that starts today, its first after the nation’s general election. Seventeen of 21 analysts surveyed by Bloomberg News expect the BOJ to ease monetary policy at tomorrow’s end of the two-day meeting. Incoming Prime Minister Shinzo Abe, whose Liberal Democratic Party swept to victory in elections for the lower house of Japan’s Parliament on Dec. 16, said yesterday that he requested BOJ Governor Masaaki Shirakawa agree to an accord containing a 2 percent inflation target.

Japan’s currency traded near the weakest level since April 2011 versus the dollar after data today showed the country’s trade deficit widened in November. Japan’s exports fell 4.1 percent last month from a year earlier, leaving a trade deficit of 953.4 billion yen ($11.3 billion), the Finance Ministry said today in Tokyo.

The 17-nation euro extended gains against the dollar to an eighth day and touched a seven- month high amid optimism U.S. lawmakers will reach agreement on the budget and before data forecast to show improvement in German business confidence. House Speaker John Boehner is trying to sell a tax increase for top earners to fellow Republicans. The speaker said yesterday the House will vote this week on a budget “plan B” that would raise tax rates on income of more than $1 million a year, while he continues to negotiate with President Barack Obama. Obama’s administration and other Democrats immediately rejected the proposal as inadequate.

In Germany, the Munich-based Ifo institute is predicted to say its business climate index rose to 102 this month from 101.4 in November, according to economists surveyed by Bloomberg. An Ifo measure of executives’ expectations may increase to 96.4 from 95.2, while a gauge of the current situation probably slid to 108 from 108.1, surveys showed ahead of the data today.

Standard & Poor’s yesterday lifted Greece’s credit rating to B- from selective default, citing the completion of the nation’s distressed debt buyback and the determination of euro- zone member states to preserve its membership in the bloc.

EUR/USD: during the Asian session, the pair rose to $1.3255.

GBP/USD: during the Asian session, the pair rose to yesterday's high of $1.6270.

USD/JPY: during the Asian session, the pair rose to Y84.45.

The main release of the day for sterling markets comes at 0900GMT, with the release of the BOE MPC Minutes from the December meeting.