* Yen hits 2-week high against euro, 1-week high vs dollar
* Russia says G20 communique won't single out Japan on forex
* BOJ nominees awaited, less radical Muto seen front runner
* Euro slips to 3-week low versus dollar
By Jessica Mortimer
LONDON, Feb 15 The yen hit a two-week high
against the euro on Friday on speculation the next Bank of Japan
governor may be less inclined to pursue aggressive monetary and
amid uncertainty before a G20 summit in Moscow.
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.
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 was down 0.6 percent on the day at
123.35 yen, having fallen to 122.90 yen on trading platform EBS,
its lowest since Jan. 30. It hit a 34-month high of 127.71 last
"Reports that Muto is the favoured candidate to take over as
Bank of Japan governor is the main reason for the yen's
recovery," said Arne Lohmann Rasmussen, head of FX research at
Danske Bank in Copenhagen.
However, he expected the yen's gains to be "relatively
short-lived" given prospects of looser monetary policy.
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 -- all of which should keep the euro well off its
recent highs above $1.37 struck on Feb 1.
The euro fell 0.3 percent to $1.3307, its lowest
since Jan. 24, with traders saying stop loss less orders were
triggered on the drop below $1.3320.
ECB chief Mario Draghi criticised on Friday recent "chatter"
on currencies and said the euro's exchange 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
Traders and analysts said some market participants had been
eager to use Muto's likely nomination as a reason to cover their
short yen positions before the G20 meeting.
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 dollar was down 0.3 percent at 92.60 yen, having
hit a one-week low of 92.22 yen. It had set a 33-month high of
94.465 set on Monday and solid chart support was expected at
"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