NEW YORK: The dollar on Thursday traded near a seven-year high against the yen on stepped-up speculation that Japanese Prime Minister Shinzo Abe will call a snap election in December.
The greenback also posted gains against Britain's pound, which plumbed 14-month lows against the U.S. currency, but was mixed against other major currencies.
The U.S dollar index basket of currencies was off 0.1 percent after New York Federal Reserve President William Dudley said any premature tightening in America's monetary policy could hurt the economic recovery.
"The market seems content to sit in the range here and bide time on the dollar," said Shaun Osborne, chief foreign exchange strategist at TD Securities in Toronto. "We think the dollar in the long run goes up."
The dollar was up 0.1 percent at 115.61 yen, not far from the seven-year high of 116.11 yen struck on Tuesday. It briefly touched a low of 115.32 yen after government data showed that more Americans last week filed for jobless benefits than expected but still near a 14-year low.
An election in Japan is seen returning Abe to power with a bigger mandate, which analysts believe would allow him to implement a second round of reflationary policies and possibly delay a planned sales tax hike. That has spurred a rally in Japanese stocks and weighed on the yen.
"Dollar/yen is headed higher, and all those who missed the bus at lower levels will use the political developments to build long dollar positions," said UBS strategist Geoff Yu.
A senior figure in Abe's ruling party told reporters it appeared the premier had decided to call an election. Abe is expected to make his decision depending on the strength of economic indicators, with third-quarter gross domestic product data due on Monday.
Britain's sterling dipped to a 14-month low against the dollar, with weaker housing data adding to pressure on the pound from a shift in the Bank of England's economic outlook a day earlier.
The pound was last off 0.2 percent at $1.5743 and is down 5 percent year to date against the dollar.
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