The dollar climbed to a 3-1/2-month high against the yen on Thursday as markets weighed the election of businessman Donald Trump for U.S. president and how his policies could affect economic growth.
The rose by more than 1 percent on the day to 106.66 yen for the first time since July. The dollar also rose substantially against a basket of major world currencies, touching its highest level in more than two weeks and hovering just below levels last seen in early February.
"It's a continuation of the post-election response," said Ian Gordon, FX strategist at Bank of America Merrill Lynch. "For us, the clean sweep of both the White House and the Congress by the Republicans is a clear signal that we are going to get a pretty significant fiscal stimulus in 2017 and that is going to be bullish for (interest) rates."
Expectations that Trump's policies would boost spending and inflation helped U.S. long-dated Treasury yields rise to their highest levels in more than 10 months. Yields on benchmark 10-year notes and 30-year bonds had their largest one-day rise in years on Wednesday and added to gains on Thursday ahead of a 30-year bond auction.
Higher interest rates for U.S. Treasuries raise the value of the dollar by making dollar-denominated assets more attractive to investors.
Analysts also pointed to Trump's tone of unity during his presidential acceptance speech as helping spur confidence in the dollar.
The Chinese yuan weakened past 6.80 per dollar in the offshore market on Thursday for the first time in more than six years on fears that Trump will act on the protectionist rhetoric that ran through his campaign, particularly regarding trade with China. The yuan eased to 6.8259 against the dollar.
"For Asian currencies, the initial conclusions are somewhat negative, given the trade dependency of the region, if not on the U.S., then on China," HSBC strategist Paul Mackel said in a note.
The , also weakened by worries over Trump's campaign proposals to renegotiate trade deals, fell to a low of 20.546 pesos per dollar, nearing its all-time low mark touched on Wednesday.
The dollar was down almost 1 percent after the central bank cut rates on Wednesday and signalled the possible end to easing.
The euro fell to $1.0865, its lowest against the greenback since Oct. 25.