* U.S. markets up slightly, awaiting Congress
* Yen at 20-month low vs dollar, boosts Nikkei to 9-month
high
* European markets closed
* MSCI Asia ex-Japan little changed on low trading volume
NEW YORK/TOKYO, Dec 26 (Reuters) - The yen fell to a
two-year low against the dollar on Wednesday after Japan swore
in a new prime minister who has called for weakening the
currency to stimulate inflation, while U.S. stocks slipped in
thin trading.
The dollar rose as high as 85.74 yen on trading
platform EBS, the highest since September 2010, following the
swearing-in of Shinzo Abe as premier and was last at 85.65. The
euro rose as high as 113.40 yen, a 16-month high, up
1.4 percent. The euro was at $1.3223 against the dollar,
up 0.3 percent.
Abe is calling for a mix of aggressive monetary policy
easing and big fiscal spending to beat deflation and weaken the
yen. He is pressuring the Bank of Japan to adopt a 2 percent
inflation target that would auger for a weaker currency,
threatening changes at the central bank if his wishes are not
met.
"The election of Abe has had a galvanizing effect on the
dollar/yen exchange rate and he has been able to accomplish more
in two months of jawboning than the BoJ has... over the past
several years," said Boris Schlossberg, managing director of FX
strategy at BK Asset Management in New York.
U.S. shares were slightly lower in post-Christmas trading,
picking up from losses on Monday, as Congress looks likely to
fail to negotiate a deal to avoid the "fiscal cliff," a series
of $600 billion in spending cuts and tax hikes that would slow
the U.S. economy sharply unless lawmakers take action.
A U.S. official said on Tuesday that President Barack Obama
may return to Washington from his Hawaiian holiday as early as
Wednesday evening to resume talks.
With odds increasing that Congress will not come to an
agreement before the end of the year, a series of big decisions
will wait until early 2013, when tax rates are scheduled to rise
for most Americans. Economists warn that the world's largest
economy could fall into recession if the automatic tax hikes and
spending cuts are not offset in some way.
U.S. stocks have held in a tight range, recovering losses
sustained just after the U.S. election in November. The S&P 500
is still up about 13 percent on the year.
"No one is hitting the panic button yet and part of that
lack of panic selling is the notion that (Wall) Street is
getting comfortable with the likelihood of a temporary fix for
the fiscal cliff - something that gets us over the date of Jan.
1 in a way where it can be re-addressed," said Peter Kenny,
managing director at Knight Capital in Jersey City, New Jersey.
There is some concern that the impending tax hikes cut into
holiday spending in the United States. Holiday-related sales
were up 0.7 percent from Oct. 28 through Dec. 24, compared with
a 2 percent increase in 2011, according to MasterCard Advisors
SpendingPulse.
The Dow Jones industrial average dropped 53.68
points, or 0.41 percent, at 13,085.40. The Standard & Poor's 500
Index was down 9.13 points, or 0.64 percent, at 1,417.53.
The Nasdaq Composite Index was down 27.69 points, or
0.92 percent, at 2,984.91.
Many markets remained closed following Christmas. European
exchanges were largely shuttered, and Hong Kong and Australia
were also closed. The MSCI All-World Index was
down 0.15 percent on Wednesday.
U.S. single-family home prices rose in October for the ninth
month in a row. The S&P/Case Shiller composite index of 20
metropolitan areas gained 0.7 percent in October on a seasonally
adjusted basis, stronger than the 0.5 percent rise forecast by
economists polled by Reuters.
Ten-year U.S. Treasury notes rose 8/32 of a point in price
to yield roughly 1.7476 percent. The U.S. bond
market was closed on Tuesday for Christmas.
Brent crude climbed above $110 per barrel on
Wednesday, hitting a two-month high, with investors hoping for a
last-minute deal to avoid a U.S. fiscal crisis. U.S. crude
futures gained $2.30, or 2.6 percent, to $90.91.
YEN WEAKENS
The weaker yen has bolstered hopes for better earnings from
Japanese companies and underpinned the Nikkei, which has gained
about 18 percent since mid-November, when the election was
scheduled. The yen has lost nearly 8 percent against the dollar
in the same period.
The Nikkei closed at a nine-month high on Wednesday,
with a 1.5 percent gain.
Minutes of the BOJ's policy-setting meeting in November,
released on Wednesday, showed that some board members said the
central bank must act decisively, without ruling out any policy
options, if the outlook for the economy and prices worsens
further.
MSCI's broadest index of Asia-Pacific shares outside Japan
was little changed. Shanghai shares were
flat, but stayed in positive territory on the year after a 2.5
percent jump on Tuesday erased 2012 losses. It is set for a
first annual gain in three years.