* Yen hit by news that two doves chosen to lead BOJ
* Sterling weighed by Moody’s downgrade of Britain
* Euro firmer, but upside seen capped by Italy elections
By Ian Chua
SYDNEY, Feb 25 (Reuters) - The yen skidded to a 33-month low on Monday on reports that an advocate of aggressive monetary easing could soon head the Bank of Japan, while sterling was broadly lower following Moody’s downgrade of Britain’s prized triple-A sovereign rating.
The Nikkei newspaper reported the Japanese government is likely to nominate Haruhiko Kuroda and Kikuo Iwata, both vocal advocates of aggressive monetary expansion, as BOJ governor and deputy governor.
“Kuroda is a fan of a weaker yen and of deflation-bashing,” said Kit Juckes, strategist at Societe Generale.
Not surprisingly, the report prompted investors to take a fresh swipe at the yen. As a result, the dollar shot up to 94.77 , from 93.39 late in New York Friday, reaching highs not seen since May 2010.
The euro jumped to 125.36, from 123.12, but remained shy of its 34-month peak of 127.71 set early this month. Both the dollar and euro were last at 94.67 and 125.20 respectively.
“Heaven only knows whether that’s an over reaction,” Juckes said, adding his year-end target of 100 for dollar/yen and a longer term target of 110 remained intact.
Investors also took aim at sterling, pushing it to a 31-month low of $1.5073 and a record low against the New Zealand dollar at NZ$1.8025.
Late on Friday, Moody’s cut Britain’s rating by one notch to Aa1 from Aaa, citing weak prospects for economic growth. Britain joined the United States and France in having lost its triple-A rating from at least one major agency.
The outlook is now stable, meaning any further change is unlikely for the next year or so.
Sterling also lost aground on the euro, which hit 87.73 pence, highest since October 2011.
Against the dollar, the common currency edged up to $1.3229 from a six-week low around $1.3145. Further upside for the euro is seen limited as investors eye an unpredictable election in Italy.
Exit polls will be published shorter after polls close at 1400 GMT on Monday. Full official results are expected by early Tuesday.
A weak government could usher in new instability in the euro zone’s third largest economy and cause another crisis of confidence in the European Union’s single currency.
Offering a small distraction for investors in Asia, HSBC will release its February survey on China’s manufacturing sector at 0145 GMT.
In January, growth in China’s giant factory sector accelerated to a two-year high. Investors will be wanting to see if that can be sustained.