* 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 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
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
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
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
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.