* Yen falls as Japan PM resigns; likely successor in focus
* Euro slips; ECB's Noyer says euro not unusually low
* U.S. pending home sales race to 6-month high in April
(Adds comments, updates prices)
By Vivianne Rodrigues
NEW YORK, June 2 (Reuters) - The yen fell on Wednesday as
the resignation of Japanese Prime Minister Yukio Hatoyama
raised concerns about the outlook for the currency, because his
likely successor has said in the past he wanted a weaker yen.
The yen hit a two-week low against the dollar after
Hatoyama and his deputy resigned to try to boost the ruling
party's faltering fortunes in an election next month.
[]
The euro also fell against the dollar as European Central
Bank board member Christian Noyer was cited as saying the
single currency's exchange rate against the greenback was at
around a 10-year average and "by no means an unusually low
level." []
The Japanese currency fell as investors focused on
Hatoyama's expected replacement, Finance Minister Naoto Kan,
who has previously advocated a weak yen. Concerns about
political instability were also weighing on the Japanese
currency, analysts said.
Kan surprised markets earlier this year by saying he wanted
the yen to weaken more and that most businesses favored a
dollar/yen rate around 95 yen. Since then he has mostly toed
the Finance Ministry line that stable currencies are desirable
and markets should set foreign exchange levels.
"Kan is a noted dove who has been an aggressive proponent
of a lower yen in order to help stimulate Japanese exports,"
said Boris Schlossberg, a director of currency research at GFT,
in New York.
"With Japanese political situation in state of flux, the
dollar may be the only safe-haven instrument left in the
currency market for the time being," he added.
In midday trading in New York, the dollar was up 1.4
percent on the day at 92.25 yen <JPY=>, while the euro
<EURJPY=R> gained 1.2 percent to 112.64 yen.
Some analysts said yen losses were limited as investors
remained hungry for the Japanese currency, which has benefited
from risk aversion stemming from the euro zone debt crisis.
"Almost anything you throw at the yen these days is
negative, and yet here we are at these levels. That tells you
demand for yen is for reasons other than what's going on in
Japan," said Simon Derrick, head of currency research at BNYM.
The dollar also rose as data released on Wednesday showed
that pending sales of previously owned homes in the United
States topped expectations to hit a six-month high in April.
[]
"If you look at this (report) from a yield and growth
differential perspective, I think it's positive for the
dollar," said Michael Malpede, a senior analyst at Easy Forex,
in Chicago. "If it weren't for the EU debt crisis, I'd be in
the camp that says the Fed moves sooner rather than later" on
raising interest rates.
While the report was positive, analysts said the key data
remains the government's monthly reading on non-farm payrolls
due on Friday.
NOYER COMMENTS
Selling pressure on the euro continued on Wednesday and the
currency fell 0.2 percent to $1.2201 <EUR=>.
Analysts at ScotiaCapital said technical signals on the
euro are mixed, but they expect further downside before the
currency is able to sustain a rally. The next key level of
support is the psychological $1.20, followed by $1.1835, the
average level of the euro since its inception.
The euro hit a four-year low of $1.2110 on Tuesday, and
remains sensitive to any signs the euro zone sovereign debt
crisis might spread to the banking system of the 16-nation
region.
Euro/dollar risk reversals are at extreme levels, showing a
bias for puts at a bid of -3.5 on Wednesday, according to GFI
data. Wednesday's figure was, however, off the highs from two
weeks ago, which was at -3.73, the most bearish investors had
ever been on the euro since GFI made its data available to
Reuters in early 2007.
"Very few investors are ready to put on long euro/dollar
positions, and any spikes are due to profit taking on short
positions," said Niels Christensen, currency strategist at
Nordea in Copenhagen.
(Additional reporting by Steven C. Johnson and Nick Olivari in
New York and Jessica Mortimer in London; Editing by Leslie
Adler)
