* Yen slips after Japan PM Hatoyama says to resign
* Finance Minister Kan viewed as likely successor
* Euro falls after ECB's Noyer says euro not unusually low
* Focus shifts to U.S. labour market reports
By Satomi Noguchi
TOKYO, June 2 (Reuters) - The yen fell on Wednesday after
Japanese Prime Minister Yukio Hatoyama's resignation stoked
expectations that his likely successor, the finance minister,
would take a tougher stance in fighting yen strength.
Hedge funds jumped on the resignation news to drive the yen
lower, but the drop soon petered out after the euro fell
following comments from European Central Bank board member
Christian Noyer.
Noyer said in an interview with the German business daily
Handelsblatt that the exchange rate of the euro against the
dollar is not unusually low. [] His remarks came a
day after the euro hit a four-year low against the dollar.
The yen dropped to a two-week low against the dollar as
investors sold on the view that political instability would make
the economy more dependent on the Bank of Japan and its easy
monetary policy.
Market players speculated that Finance Minister Kan, who
doubles as deputy prime minister, would be the likely successor
to Hatoyama, which in turn could make investors cautious about
pushing the yen higher. []
"The market may become cautious over the possibility of
government moves to restrain yen strength because Kan has shown
his preference for a weaker yen," said Masafumi Yamamoto, chief
FX strategist in Japan at Barclays Capital.
"But given no signs that business leaders have complained to
the current government about a higher yen, the chance of Japanese
currency intervention remains very low," Yamamoto said.
The euro looked increasingly vulnerable to another sell-off
amid mounting concern that the euro zone's debt crisis is
spreading to its banking system.
The dollar held firm near a 15-month high against a basket of
currencies as market players shifted their focus to reports on
the U.S. labour market due later this week, which are expected to
show a surge in employment and a slight fall in the jobless rate.
[]
Against the yen, the dollar rose as high as 91.78 yen on
trading platform EBS, the highest since May 20, from around 91.10
yen before the first media report on Hatoyama's resignation.
It later trimmed gains to stand at 91.33 yen <JPY=>, up 0.4
percent from late New York trade on Tuesday, after the Nikkei
share average index <> turned lower and Asian stocks fell.
The ruling Democratic Party is struggling to revive its
chances in an upper house election expected in July, less than a
year after sweeping to power with promises of change.
[]
The euro rose 0.4 percent to 111.72 yen <EURJPY=R>, but also
trimming earlier gains with investors believing concerns over the
euro zone's debt crisis will outweigh any impact from political
instability on Japan's economy in the wake of Hatoyama's
resignation.
Traders said euro selling pressure was likely to continue as
the market grows more confident that the U.S. economy and its
banking system are in much better shape than their European
counterparts.
"Given the deep-seated bad debts at euro zone banks, this
looks like just the beginning of the euro's long-term slide,"
said a sales trader at a Japanese trust bank.
"Reaching parity in euro/dollar in the long-run is becoming
increasingly realistic."
The euro edged down 0.2 percent to $1.2209 <EUR=>, shedding
earlier rises. A senior prop trader for a Japanese bank said
market players are less motivated to take big positions in the
euro after taking a hit from the currency's sharp upswing on
Tuesday.
The single European currency hit a 1-
