* Yen hits 2-week low against euro, 1-week low vs dollar
* Russia says G20 communique won't single out Japan on forex
* BOJ nominees awaited, less radical Muto seen front runner
* Dollar gains vs yen accelerate after U.S. data
By Julie Haviv
NEW YORK, Feb 15 The yen slumped against the
euro and dollar on Friday as investors piled on bearish bets
amid uncertainty about a G20 summit in Moscow and questions
about who may be the next leader of Japan's central bank.
G20 officials struggled to find common ground on currency
manipulation at a summit which looked likely to be dominated by
the ultra-loose monetary polices of major developed countries,
including Japan and the United States and whether they depart
from the group's commitment to market-driven exchange rates.
A draft communique prepared for Group of 20 finance leaders
omits part of this week's Group of Seven statement declaring
fiscal and monetary policy may only be used for domestic
economic aims, a G20 delegate said on Friday.
The United States is acting in line with the position of the
Group of Seven nations by using domestic policy tools to boost
growth and reduce unemployment, Federal Reserve Chairman Ben
Bernanke said on Friday.
The possibility of officials expressing disapproval of
Japan's policy in particular has encouraged investors to take
profit on the yen's recent sharp falls, which followed
government pressure on the BOJ to ease policy to help beat
Sources told Reuters that former top financial bureaucrat
Toshiro Muto was the frontrunner to become the next BOJ
Muto is seen as likely to pursue slightly less radical
stimulus measures than some of the other contenders. A decision
could come in the next few days, the sources said.
The euro last traded up 0.6 percent at 124.78 yen,
after earlier falling to 122.87 yen, its lowest since Jan. 30.
It hit a 34-month high of around 127.71 last week.
"While the G20 Draft urges members to avoid competitive
devaluations it seemingly approves of the rebalancing that has
occurred in the European and Japanese currencies," said Douglas
Borthwick, managing director at Chapdelaine Foreign Exchange in
"This news should give further support to the upward move in
euro/yen," he said. "With the IMF's (International Monetary
Fund) Lagarde's blessing, the long euro/yen trade looks set to
"As with all G20 meetings, the pace of rebalancing - euro
higher and yen lower - is key to keeping all members content,"
The euro also remained under pressure a day after figures
showed the euro zone sinking more deeply into recession than
forecast. The grim picture is likely to keep expectations of a
interest rate cut by the European Central Bank alive.
Euro zone money market rates are also likely to ease in
coming weeks, keeping the euro well off its recent highs above
$1.37 struck on Feb 1.
The euro last traded down 0.1 percent at $1.3352,
with traders saying stop loss orders were triggered on the drop
ECB chief Mario Draghi criticized on Friday recent "chatter"
on currencies and said the euro's exchange rate was in line with
long-term averages. Like ECB policymaker Jens Weidmann, who
spoke earlier, Draghi resisted pressure from some euro zone
politicians to target the euro's exchange rate on the grounds it
The dollar extended gains against the Japanese yen and pared
gains versus the euro after U.S. data showed manufacturing in
New York state expanded in February for the first time in seven
The dollar last traded at 92.42 yen, up 0.6 percent,
after hitting a one-week low of 92.21 yen. It had set a 33-month
high of 94.465 on Monday and solid chart support was expected at
Speculation over what, if anything, G20 officials might say
about Japan has been swirling all week.
Russia's finance "sherpa", Deputy Finance Minister Sergei
Storchak, said the drafting discussion was proving "difficult",
but the final text would not single out Japan for criticism.
. That could see yen selling resume.
"The long term weakening trend for the yen remains intact,"
said Howard Jones, adviser at money managers RMG Wealth
Management. "We are comfortable with our view the dollar will
rise to 100 yen in the coming months. It is an easy trade to
make money," he said