* Next potential leader of Japan calls for weaker yen
* Break of 81 yen could spur further gains
* Euro inches up vs dollar, helped by yen selling
By Nia Williams
LONDON, Nov 15 (Reuters) - The yen hit a 6-1/2 month low against the dollar on Thursday after the head of Japan’s main opposition party called for aggressive monetary easing to support growth.
The euro rallied, with gains versus the yen also helping the single currency edge up against the dollar despite lacklustre growth data from Germany and France.
Shinzo Abe, the head of Japan’s Liberal Democratic Party and the frontrunner in next month’s election, wants the Bank of Japan to consider sub-zero interest rates and reverse yen strength.
Signs the LDP will step up efforts to weaken the yen if it comes to power prompted investors to sell the currency against both the dollar and the euro.
The dollar rose around 0.9 percent on the day to 80.95 yen , its highest since April 30 and well above last week’s low of 79.07 yen. Market players reported stop loss buy orders above 81 yen that could spur further gains.
“There’s still good reason to buy into dollar/yen at the moment so I wouldn’t be surprised if we get through 81, largely on the basis that the LDP will be a bit of a game-changer for yen policy,” said Jeremy Stretch, head of FX strategy at CIBC World Markets.
The yen suffered its biggest losses against the dollar and euro in two months on Wednesday, when Japanese Prime Minister Yoshihiko Noda indicated he would call a snap election in December.
The LDP’s Abe, a vocal critic of the BOJ, has called for a new 3 percent inflation target, three times the current goal, and for the bank to take bolder action to fight deflation.
Investors also worry the LDP may be less committed to fiscal belt-tightening measures, such as planned tax hikes, than Noda’s party, adding to caution about the yen.
The euro was up 0.9 percent at 103.05 yen, having earlier hit a high of 103.21 yen, as investors unwound short euro positions taken earlier this week on concerns about when Greece will receive its next tranche of financial aid.
The euro inched up 0.1 percent to $1.2755, recovering from Tuesday’s two-month low of $1.2661. Resistance was expected just above the session high of $1.2757 hit during Asian trade and above that at $1.2811, the 200-day moving average.
The euro looked vulnerable to concerns about slowing growth and uncertainty over aid for Greece and Spain.
Data showed Germany and France, the euro zone’s two biggest economies grew by 0.2 percent in the third quarter, but that is unlikely to prevent the euro zone from sliding into recession.
Some analysts said investors were wary of selling the euro heavily in case policymakers surprised markets with decisive action to tackle the euro zone 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 do not want to go long either.”
Worries U.S. lawmakers will not reach compromise to avert spending cuts and tax rises that could tip the economy into recession also curbed appetite for perceived riskier currencies.
The Australian dollar dipped 0.1 percent to US$1.0359, having earlier hit a 10-day low of US$1.0347.
Sterling hit a two-month low of $1.5828 after a surprise fall in UK retail sales in October reinforced investors’ gloomy view on the UK economy.