By Gregor Stuart Hunter SINGAPORE (Reuters) -The U.S. dollar surged to its strongest level against the yen in almost eight months in Asian trading on Wednesday as risks around the U.S. government shutdown intensified and traders tried to gauge the extent of fresh fiscal stimulus from Japan, boosting demand for assets considered to be safer havens. Against the yen, the dollar traded up as much as 0.5% at 152.6400 yen, its firmest since February 14, as investors weigh up the impact of Sanae Takaichi's economic policy settings. Takaichi, who surprised markets by winning the ruling party's leadership election over the weekend and is expected to become Japan's next prime minister, has left investors wondering whether the protégé of the late Shinzo Abe could usher in similar stimulus policies that may boost stocks but leave the yen fragile. "While the economic case for tighter monetary policy remains intact, we suspect that the Bank of Japan will use the pressure by Japan’s incoming government as an opportunity to delay rate hikes until January," analysts from Capital Economics wrote in a research report. The kiwi dollar tumbled as much as 1% to lows of $0.5739 after the Reserve Bank of New Zealand surprised the market with a larger-than-expected 50-basis-point interest rate cut and flagged more easing ahead following the recent deterioration in economic data. "The market only had a 30% chance of the RBNZ cutting by 50 basis points today," said Joseph Capurso, head of FX, international and geoeconomics research at Commonwealth Bank of Australia, which had correctly anticipated a 50 bps. "It was inevitable that the kiwi was going to fall." The Australian dollar slipped 0.4% to a low of $0.6558 as the volatility in the kiwi spilled over across the Tasman Sea. "This is a clear attempt from the RBNZ to get ahead of the curve and deliver some ‘shock therapy’ to business and consumer confidence," said Mike Jones, chief economist at Bank of New Zealand in Auckland. "It seems unlikely the RBNZ will stop at 2.50%, so wholesale interest rates look set to remain under pressure and that will probably cap any gains in the NZ dollar in the short-term." The dollar index, which measures the greenback's strength against a basket of six currencies, rose as much as 0.4% to 98.9320, its highest level since August 5, as U.S. President Donald Trump threatened to carry out mass firings of federal workers. With the shutdown entering its second week, the probability of an end to the standoff within the next week stands at 25%, according to the betting site Polymarket.Precious metals markets recorded fresh highs as investors sought safe havens, with spot gold prices breaching the $4,000 per ounce milestone for the first time."Uncertainty about the global economy is one of the main drivers, and the U.S. government shutdown isn't exactly helping sentiment, either," analysts from ING wrote in a research note. Demand for less risky assets pushed the yield on the benchmark 10-year Treasury bond slightly lower to 4.1229%, compared with the U.S. close of 4.127% on Tuesday. The Federal Reserve is still widely expected to lower interest rates later this month, with Fed funds futures implying a 94.6% probability of a 25-bps cut, according to the CME Group's FedWatch tool. The euro stood at $1.1617, down 0.4% in Asian hours, while sterling was at $1.33885, off 0.3%. The offshore yuan fetched 7.1466 yuan per dollar, unchanged compared with the previous session. (Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam, Christian Schmollinger and Kim Coghill)
(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)
