* Next potential leader of Japan calls for weaker yen
* Euro inches up vs dollar, helped by yen selling
* Australian dollar hits 2-wk low versus U.S. dollar
By Philip Baillie
LONDON, Nov 15 The yen hit its lowest level
against the dollar since late April on Thursday and looked
vulnerable to more losses after the head of Japan's main
opposition party called for a move towards negative interest
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 recession in the third quarter of 2012.
Shinzo Abe, the head of Japan's Liberal Democratic Party and
frontrunner in next month's election, wants the Bank of Japan to
consider sub-zero interest rates and reverse the yen's strength.
Signs that 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 more than 1.2 percent on the day to 81.24
yen, its highest since April 27 and well above last
week's low of 79.07 yen.
"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.
The yen has fallen heavily since Japanese Prime Minister
Yoshihiko Noda indicated he would call a snap election in
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 are also concerned 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 rose 1.3 percent to 103.54 yen as
investors unwound short euro positions taken earlier this week
on concerns about when Greece will receive its next tranche of
The euro also edged up 0.15 percent to $1.2755,
recovering from Tuesday's two-month low of $1.2661. Resistance
was expected at $1.2812, the 200-day moving average.
Traders cited buying by European corporates earlier in the
session that helped lift the euro.
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.
The Australian dollar fell to a two-week low of
US$1.0330, its lowest level since Oct. 30.
Meanwhile sterling hit a two-month low of $1.5828
after a surprise fall in UK retail sales in October reinforced
gloomy views on the UK economy.