(Reuters) -- The dollar touched a three-month high against the yen on Monday, as investors bet an emphatic election victory for Japan's ruling party would see a continuation of "Abenomics", the ultra-loose policies that have kept downward pressure on the yen.
The greenback was trading around its highest in 2-1/2 weeks against a basket of six major currencies <.DXY>, as markets speculated that the next chair of the U.S. Federal Reserve would take a more hawkish stance on monetary policy.
U.S. President Donald Trump said in comments aired on Monday that he would make his choice on the Fed chair "very shortly" and was still weighing at least three people: Federal Reserve Governor Jerome Powell, Stanford University economist John Taylor and current Fed Chair Janet Yellen.
Japanese Prime Minister Shinzo Abe's ruling bloc scored a big win in Sunday's election, with his Liberal Democratic Party (LDP)-led coalition winning a combined 313 seats, keeping its two-thirds "super majority" in the lower house.
"The politics of Abenomics will go on ... (and) additional spending can only be supported by an extension of monetary policy," said Esther Reichelt, currency strategist at Commerzbank in Frankfurt.
But the major driver of the dollar against the yen in the near future is likely to be the Fed chair decision, she added.
Abe's victory eased fears that the economic steps implemented under his leadership, including an expansive asset-purchase program by the Bank of Japan, would be disrupted and would halt the yen's depreciation against the dollar.
The dollar gained as much as half a percent to reach 114.10 yen after the results, its strongest since July 11. It came off those highs in London trade but was still up 0.3 percent on the day at 113.89 yen.
"The relatively muted rise in dollar/yen following Abe's election win is consistent with the fact that this was very much the most expected result," said BNP Paribas currency strategist Sam Lynton-Brown.
Some analysts said Abe's emphatic win increased the chances that BOJ Governor Haruhiko Kuroda, who is widely considered a policy dove, would be reappointed when his term ends.
The greenback had already climbed broadly on Friday, after the U.S. Senate approved a budget blueprint for the 2018 fiscal year, clearing a critical hurdle for Republicans to pursue a tax-cut package without Democratic support.
It added to those gains on Monday, climbing 0.4 percent against the euro, which was trading at $1.1742 .
The common currency has drifted down from a 2-1/2-year peak of $1.2092 scaled on Sept. 8, as hopes for the European Central Bank to take a more hawkish stance have been tempered by speculation that it is not be in a hurry to tighten policy.
The ECB holds a policy meeting on Thursday.