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US dollar hits 20-month high against yen

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TOKYO, Dec 26 AFP

December 26 2012, 11:24AM

The US dollar has risen past 85.00 yen in early Asian trade on expectations that the Bank of Japan will take more monetary easing steps under political pressure from the incoming government.

The US dollar was at 85.10 yen shortly after 1100 AEDT on Wednesday, the first time above 85.00 yen since April 2011 and up from 84.78 yen in Tokyo afternoon trade on Tuesday.

The Japanese currency has been declining as incoming prime minister Shinzo Abe, whose Liberal Democratic Party won a landslide in general elections last week, steps up pressure on the central bank to take bold easing steps.

Abe is to be named prime minister later on Wednesday, after he swept to power on a hawkish platform of getting tough on diplomacy while fixing the economy with active fiscal spending and monetary easing.

On Sunday he threatened to change a law guaranteeing the central bank's independence if it did not agree to set a two-per cent inflation target, in a bid to drag the country out of the deflation that has haunted its economy for years.

Abe, who previously served as prime minister from 2006 to 2007, is expected to name Taro Aso, another former prime minister in Japan's revolving-door political system, as finance minister and his own deputy, reports said.

As prime minister in 2008-2009, Aso launched a series of economic stimulus packages worth hundreds of billions of dollars to prop up Japan's long-struggling economy.