By Richard Leong and Dion Rabouin
NEW YORK (Reuters) - The dollar rose to its highest level against the yen in more than two weeks on Tuesday, as a rekindled appetite for risk continued to drive sentiment after Japan's ruling coalition won a weekend election.
The election results drove expectations for new measures to stimulate growth in Japan, which were reinforced by a meeting on Tuesday of Prime Minister Shinzo Abe and former U.S. Federal Reserve Chairman Ben Bernanake.
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The greenback, which recouped much of its losses following Britain's vote to exit the European Union, gained nearly 2 percent against the yen, after rising 2.25 percent on Monday. It was the largest two-day rise for the dollar against the yen since November 2014.
A rebound in equity markets across the globe, with the Standard & Poor's 500 and Dow Jones stock indexes hitting record highs, has also led investors to reduce their holdings of safe-haven assets like the yen.
The dollar jumped 1.95 percent against the Japanese currency to 104.79 yen, its strongest level since June 24, when the British referendum result roiled global markets.
In his meeting with Abe, Bernanke told the premier that the Bank of Japan has steps available to support the economy, Japan's top government spokesman said Tuesday.
Japan has been considered the most likely nation to attempt a policy of "helicopter money," an economic term for policy in which governments give cash directly to residents in order to stimulate growth.
"Given that Bernanke is widely viewed as almost the godfather of helicopter money, I think speculation is starting to grow that they will deliver something along those lines," said Mazen Issa, senior FX strategist at TD Securities in New York.
Japanese Economy Minister Nobuteru Ishihara said earlier he would begin discussions on the size of the government's fiscal stimulus package, which may be more than 10 trillion yen ($95.4 billion).
Commodity currencies including the Australian and New Zealand dollars jumped to multi-month highs as risk appetite returned. The New Zealand dollar hit a 14-month high of $0.7318 while the Australian dollar rose against the greenback to its highest level since May 3.
Sterling rose sharply as Britain's interior minister, Theresa May, who is set to become Britain's prime minister on Wednesday, eased political tensions that had ratcheted up after the Brexit vote.
The pound rose 2 percent to $1.3265, its largest one-day percentage gain since June 21. It pulled further away from a 31-year low of $1.2798 set last week, though investors remain uncertain about May's approach to negotiating Britain's departure from the EU. [GBP/]
"We see more downside for the pound both on Thursday and the months ahead," said Josh O'Byrne, Citi currency strategist in London.
(Additional reporting by Anirban Nag in London, Masayuki Kitano in Tokyo; Editing by Bernadette Baum and Leslie Adler)