Election news sends yen up, euro lower

Election news sends yen up, euro lower

Story link: Election news sends yen up, euro lower

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The yen was up on Monday in the wake of a landslide victory for Prime Minister Junichiro Koizumi and his ruling Liberal Democratic party on Sunday in parliamentary elections, giving the party a larger majority than it had before the election. Also helping the yen was an upward revision of the second quarter gross domestic product to an annualized 3.3 percent.

The yen gained 1 percent to ¥134.99 in relation to the euro and it was up 0.8 percent to ¥200.32 versus sterling. Additionally, the Japanese currency sat at ¥109.87 against the US dollar.

The euro was down on the day due to the expectation that the upcoming election in Germany will seat a coalition government that will put a halt to all economic reform. Also a factor was a warning from the prime minister of Italy that the “hyper-valuation” of the euro could be harmful to the economy.

The euro lost 0.9 percent to $1.2287 in relation to the US dollar, while it was down to as much as £0.6714 versus sterling before recovering to £0.6737.

The US dollar was helped by the general opinion that the Federal Reserve will go ahead and raise interest rates again on September 20 despite the aftermath of Hurricane Katrina, and that it will use the excuse that reconstruction work in the storm zone will boost 2006’s GDP.

The US dollar gained 09 percent to C$1.1861 in relation to the Canadian dollar, while it was up 1 percent to $1.8230 against sterling.

Sterling’s general weakness on the day was due to the fact that August’s month-on-month producer price inflation was reported at only 0.2 percent instead of the predicted 1.4 percent.

Meanwhile, the Swiss franc lost 1.1 percent to SFr1.2570 versus the US dollar.