The yen fell by well over 1 per cent against the dollar on Monday as Japan's stocks jumped, after the country's ruling coalition won a landslide victory in upper house elections, boosting hopes for more monetary stimulus.

The greenback had already been given a lift by a bumper US jobs report on Friday, which saw investors price back in the chance of an increase in interest rates by the Federal Reserve before the end of the year.

The dollar extended those gains on Monday, gaining almost half a per cent hit a four-month high against a basket of currencies of 96.728.

Japan's Nikkei stock average closed up 4 per cent after Prime Minister Shinzo Abe's victory. He is expected to bolster his grip over the conservative party, which he led back to power in 2012 promising to revive the economy with hyper-easy monetary policy, fiscal spending and reforms - a programme known as "Abenonics".

“He won (the election) in a landslide and immediately announced that he would add further fiscal stimulus - that is, to continue Abenomics and try to succeed in his aim of bringing the Japanese economy back to life, as well as increasing inflation,” said Commerzbank currency strategist Thulan Nguyen, in Frankfurt. “That is causing the yen slide at the moment.”

Nguyen said that adding further fiscal stimulus would necessitate an expansion of monetary stimulus in order to keep bond yields down and shore up inflation.

The dollar rose 1.4 per cent on the day to 102.01 yen, its strongest in six days.

US job creation in June was much stronger than expected, increasing by 287,000 and easing fears that the labour market may be faltering. Though the core view is still that interest rates will stay where they are, a 24 per cent chance of a hike by December is now being priced in, according to CME FedWatch.

“The data was likely strong enough to reduce concerns that weak job creation in April and May was signalling the beginning of a much more severe contraction or even recession in the United States, which in turn has seen equities and risk-sensitive currencies end the week with strong gains,” wrote BNP Paribas strategists in a note to clients.

The euro edged down on to $1.1026, staying within the $1.10-$1.12 range in which it has mainly traded since the day after the news broke that Britain had voted to leave the European Union.

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