* Next potential leader of Japan calls for weaker yen
* Euro inches up vs dollar, helped by yen selling
* EU top economic official seeks to rule out write-off of
By Julie Haviv
NEW YORK, Nov 15 The yen tumbled to its lowest
against the U.S. dollar since late April on Thursday after the
leader of Japan's main opposition party called for a move toward
negative interest rates, sapping the currency's appeal despite
its safe-haven status.
The euro rallied to a two-week high against the yen and also
rose against the dollar, despite data showing the euro zone slid
into its second recession since 2009 in the third quarter of
Shinzo Abe, the head of Japan's Liberal Democratic Party and
front runner in next month's election, wants the Bank of Japan
to consider sub-zero interest rates and reverse the yen's
Abe, pushing the central bank for bold easing steps, told
reporters he wants to work with the BOJ to reverse the trend of
yen strength as it hurts the competitiveness of small firms.
"The weakness in the yen is evidence that the market is
pointing to the Bank of Japan's potential to become more
dovish," said George Saravelos, G10 FX strategist at Deutsche
"Our forecast is for 82-83 yen for the year end," he added.
Nevertheless, the Bank of Japan is expected to hold its fire
at a meeting of its policy board next week and may also defy
market expectations of action in December.
The yen has fallen heavily since Japanese Prime Minister
Yoshihiko Noda indicated he would call a snap election in
The dollar rose as high as 81.45 yen, its highest
since April 25. It last traded at 81.26, up 1.3 percent on the
"The yen may have further room to fall with the election a
month away, but worries about the U.S. budget showdown
may slow its descent," said Joe Manimbo, senior market analyst
at Western Union Business Solutions in Washington D.C.
The euro last traded at 103.78, up 1.6 percent on
the day as investors unwound short euro positions taken earlier
this week on concerns about when Greece will receive its next
tranche of financial aid.
The European Union's top economic official sought to rule
out any write-off of Greece's debt to governments on Thursday
after a European Central Bank policymaker said for the first
time that a "haircut" on part of it was probable.
The euro rose 0.3 percent to $1.2776, recovering from
Tuesday's two-month low of $1.2660. Traders cited buying by
European corporates earlier in the session that helped lift the
The single currency looked vulnerable with concerns about
slowing growth in the euro zone and uncertainty over aid for
Greece and Spain seen by analysts as likely to cap gains.
But some analysts said investors were wary of selling the
euro heavily in case policymakers surprised markets with
decisive action to tackle the debt crisis.
"They don't want to sell into it too aggressively in case
there's a policy response from the European Central Bank that
would see people get stopped out of shorts," said Geoffrey Yu,
currency strategist at UBS.
"But there are plenty of structural problems out there so
people do not want to go long either."
Worries about how U.S. lawmakers can compromise over the
federal budget to avert looming spending cuts and tax rises that
could tip the economy into recession also curbed the appetite
for perceived riskier currencies.
While an array of U.S. data impacted dollar price action,
discussion about the U.S. "fiscal cliff" should be a main driver
of the greenback for the rest of the year.
The number of Americans filing new claims for jobless
benefits surged last week to a 1 1/2-year high.
Separate data showed U.S. consumer prices rose in October
and a gauge of manufacturing in New York state showed that
activity slowed in November for a fourth straight month.
Meanwhile, factory-sector sentiment dropped in the U.S.