* Yen slips as coalition loses majority in upper house poll
* Long liquidation in yen, Japan importer yen selling cited
* But yen drop on poll result seen likely to be short-lived
* Focus turning to U.S. corporate earnings
By Masayuki Kitano
TOKYO, July 12 (Reuters) - The yen eased on Monday after
election results showed political uncertainty ahead for Japan,
but the move was seen likely to be short-lived with attention
turning to the U.S. earnings season as a gauge of risk appetite.
Japan's ruling coalition, led by Prime Minister Naoto Kan's
Democratic Party of Japan, lost its upper house majority in
Sunday's election, putting Kan's policies to deal with the
country's massive debt at risk. []
Although the DPJ has a dominant grip on the more powerful
lower house, the election makes policy stalemate more likely.
Market players said the outcome helped trigger yen-selling,
including likely long liquidation. One trader cited dollar buying
against the yen by hedge funds.
Such flows, together with Japanese importer demand for the
dollar, helped push the dollar higher against the yen, market
players said.
But traders said focal points in the near term were the start
of the U.S. earnings season this week and the results of stress
test at European banks due later in July, adding that yen-selling
pressure stemming solely from the upper house election result was
likely to be limited in scope and duration.
"I think we may see a move towards 90 yen to the dollar and
that may be it," said a trader for a Japanese bank, adding that
long liquidation in the yen seemed to be the main reason behind
the yen's dip on Monday.
The dollar rose 0.3 percent against the yen to 88.90 yen
<JPY=>, pulling away from a seven-month low of 86.96 yen hit on
trading platform EBS in early July.
On daily Ichimoku charts, the dollar faces resistance near
89.55 yen, roughly where the kijun sen now lies.
Overall, the Tokyo market reaction to the election was
subdued, with the benchmark Nikkei average <> little changed
on the day and 10-year Japanese government bond futures eking out
a small gain <2JGBv1>.
The latest U.S. Commodity Futures Trading Commission (CFTC)
data showed that currency speculators increased their long
positions in the yen to 37,926 contracts in the week that ended
July 6, up from 27,427 contracts in the previous period. []
The euro was almost flat against the yen at 112.00 yen,
having failed to maintain small gains made earlier in the day.
<EURJPY=R>.
Against the dollar, the euro fell 0.3 percent to $1.2598
<EUR=>. Resistance is seen near $1.2715/20, the trendline from
the December high.
The euro touched a two-month high of $1.2723 on Friday,
supported by strong German data, some clarity on European bank
stress tests and a turnaround in appetite towards riskier assets.
The latest CFTC data showed speculators had decreased bets
against the euro to 38,909 contracts, from 73,670 contracts.
Traders said they will watch how a Greek debt auction goes
this week for more direction on the euro. The debt-laden country
plans to auction six-month treasury bills on July 13.
The dollar index <.DXY> rose 0.3 percent to 84.225, pulling
away from a two-month low of 83.622 hit on Friday. The greenback
has been under pressure since early last week, hurt by growing
worries about a slowdown in the United States and easing concerns
about the euro zone.
"From their June 8 peak, dollar net longs have tumbled by 80
percent," wrote David Watt, a senior currency strategist at RBC
Capital.
"Along the way, the dollar index has dropped from over 88 to
below 85. Much of the most recent drop seems due to a successful
Spanish bond auction, though yield spreads are working against
the dollar and are an underlying factor at play too."
The U.S. earnings season begins with Alcoa Inc <AA.N> after
the closing bell on Monday. Analysts are expecting overall
second-quarter earnings to grow by 27 percent, according to
Thomson Reuters data. That is up from the 22.4 percent that
analysts were anticipating at the beginning of the year.
But given worries about a U.S. slowdown, markets will be
looking at companies' guidance on the coming quarter too, said
Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Co.
"We haven't had pre-announcement earning revisions, which is
a good sign. But depending on the outlook on the third quarter,
market sentiment could deteriorate again, which would hurt the
dollar," Kitakura said. [].
(Additional reporting by Anirban Nag in Sydney; Charlotte Cooper
in Tokyo; Editing by Michael Watson)
