The yen slumped on Friday, hitting a three-month low against the euro as uncertainty grew about the fate of Japan's postal reform bills and their sponsor - Prime Minister Junichiro Koizumi. The dollar meanwhile ticked up from Thursday's two-month low against the euro but lacked energy to extend gains ahead of a US jobs report later in the day.
"Long holders of the yen were unable to stand given current developments in Japanese politics," said Kotaro Kunimochi, director of forex trading at Barclays Capital.
Koizumi's plan to privatise Japan Post - the centrepiece of his reform agenda - has met growing opposition from his own Liberal Democratic Party even as he has tacitly threatened to call an election if parliament rejects the bills.
A few upper house members of the ruling LDP who had been seen among swing voters suggested on Friday that they would oppose the bills when the upper house vote is held on Monday, slightly tilting odds against the bills being passed.
The news made many investors nervous as most have expected the legislation to get through. Rejection of the bills and an ensuing general election could lead to the fall of Koizumi's ruling LDP, analysts said.
The dollar bought around 111.70 yen, up 0.4 percent from 111.23 yen in late US trade.
The euro rose to around 138.20 yen - its highest level since late April - from 137.75 yen.
The Australian dollar bought 86.00 yen, holding near a seven-year high.
The euro bought around $1.2370, down slightly on the day but still in sight of the two-month high of $1.2403 hit on Thursday.
The market awaited US payrolls data due at 1230 GMT, with economists forecasting 183,000 jobs created in July.
"The economy in the United States is still much stronger than in Europe," said Junya Tanase, forex strategist at J.P. Morgan Chase Bank.
"But with the gap in growth prospects narrowing ... evidence of solid US growth alone won't be enough to push the dollar higher from current levels," he said.
Many in the market were looking to the data for more clues about whether the dollar's interest rate advantage over other key currencies would keep widening after 2005.
Comments
Comments are closed.