Japan shares at two-decade top, yen near three-month low as Abe wins

Japanese shares jumped on a weaker yen on Monday as an election win for Shinzo Abe’s ruling bloc gave a green light for more policy stimulus, while the euro eased as Spain’s constitutional crisis aggravated concerns about political unity in the region.

The U.S. dollar was the major beneficiary as President Donald Trump and Republicans took a small step toward tax cuts, boosting Wall Street stocks and lifting bond yields. 

Japan's Nikkei .N225 raced up 1 percent to its highest since 1996 after Prime Minister Abe looked to have easily won in national elections over the weekend. 

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS held steady, while Singapore's main index .STI reached its highest in over two years. 

Investors assumed Abe’s victory would allow the Bank of Japan to continue with massive monetary easing that depresses bond yields and the yen, even as the U.S. Federal Reserve seems determined to hike rates again in December.

The dollar rose 0.2 percent to 113.74 yen JPY= and briefly touched its highest since mid-July at 114.09. It faces stiff resistance at the July top of 114.49, but a break would open the way to its March peaks around 115.51. Against a basket of currencies, the dollar edged up 0.1 percent .DXY. 

The yen even slipped against the euro EURJPY=, which was having its own troubles as the Spanish government urged Catalans to accept its decision to dismiss their secessionist leadership and to take control of the restive region.

The nation’s biggest political crisis in decades enters a decisive week as Madrid tries to impose its control, although investors have so far assumed the political strife would not spread to elsewhere in the European Union. 

The euro eased only a modest 0.13 percent on Monday to $1.1770 EUR= and has strong chart support around $1.1729.