* Dollar/yen slips to Y83.25 ahead of Japan party vote
* Dlr index at 1-mth low, breaks 200-day moving average
* Pound drops on surprise weakness in British house prices
* Kiwi down on weak NZ retail sales, near 4-mth low vs Aussie
By Hideyuki Sano
TOKYO, Sept 14 (Reuters) - The dollar slid to a new 15-year
low against the yen on Tuesday ahead of a Japanese ruling party
leadership vote in which the prime minister faces a challenge
from a proponent of more aggressive fiscal stimulus.
The dollar hit a nine-month low against the Swiss franc and a
one-month low against a basket of currencies after suffering its
steepest fall against the euro in two months the previous day as
rising investor risk appetite helped the euro.
Japanese media surveys have shown the race between Prime
Minister Naoto Kan and party heavyweight Ichiro Ozawa is too
close to call, although analysts said some last-minute
speculation Kan could edge Ozawa was fuelling dollar selling.
The result is expected at around 0630 GMT.
"If Kan wins, the market will try to sell the dollar, betting
that Japan cannot intervene and sell the yen at this stage," said
Daisuke Karakama, a market economist at Mizuno Corporate Bank.
As Ozawa has been more emphatic than Kan in saying he would
consider currency intervention, even solo intervention, some
market players would see an Ozawa victory as positive for the
dollar, at least in the near term.
But any rise in the dollar may be short-lived, with Monday's
84.43 intraday peak seen as the first point of resistance, due to
expectations of more dollar selling by Japanese exporters ahead
of their half-year book closing on Sept. 30.
"There are some expectations of an Ozawa victory. But many
traders are not looking to buy more dollars. They just want to
sell the dollar if there was intervention that would push up the
dollar," said a trader at a Japanese bank.
Junya Tanase, a currency strategist at J.P. Morgan Chase
Bank, said the dollar could fall even if Ozawa wins, as Ozawa's
reflationist policy platform could boost Japanese bond yields,
shrinking the yield gap between Japan and the United States.
"We think there is little difference between the two
candidates in their stance on intervention. But an Ozawa victory
could boost Japanese bond yields as the bond market seems to be
sensitive about fiscal deterioration," Tanase said,
Japanese bond yields started to spike on Aug. 26, the day
Ozawa announced his bid for the party leadership.
On Tuesday the dollar fell to 83.25 yen <JPY=> before
returning to 83.35 yen, down about 0.4 percent on the day.
The dollar/yen rate has closely tracked U.S.-Japan yield
gaps, partly because a smaller gap means less incentive for
Japanese investors to buy U.S. debt instruments. And on Monday,
the dollar came under pressure against the yen due to falls in
U.S. bond yields despite strength in global shares.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
PDF presentation on the yen: http://r.reuters.com/zuz33p
PDF on Japan leadership vote: http://r.reuters.com/vyk92p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The euro <EUR=> traded at $1.2882, flat on the day and
keeping much of Monday's 1.6 percent gains following solid data
from China and relief over new Basel III banking rules.
It faces a major resistance point at $1.2920-30, a level that
has blocked the currency a few times since August.
The dollar index <.DXY> languished at 81.80, down 0.2 percent
after grazing a new one-month low of 81.757 and piercing its
200-day moving average of at 81.761. A clear break below the
moving average could stoke pessimism over the U.S. currency.
The yen also recouped some of its recent losses on the
crosses, particularly against the Australian <AUDJPY=R> and New
Zealand dollars <NZDJPY=R> which shed about 1 percent on the day
as Monday's improvement in investor sentiment failed to maintain
momentum.
"There's been less follow-through on Asian equities,
commodity currencies haven't fared as well and that's probably
another factor supporting the yen," said Mitul Kotecha, global
head of FX strategy at Credit Agricole CIB in Hong Kong.
The New Zealand dollar also dropped about 0.6 percent to
$0.7295 <NZD=D4> after weaker-than-expected New Zealand retail
sales added to the case against a rate hike. []
That rate outlook contrasts sharply with Australia, where
strong jobs numbers have raised expectations of a future hike,
lifting the Aussie against the New Zealand dollar.
The Australian dollar rose 0.4 percent to NZ$1.2790
<AUDNZD=R>, edging closer to a four-month high around NZ$1.2845
hit earlier in the month.
Against the U.S. dollar, the Aussie dollar fell 0.2 percent
to $0.9331, still a whisker from five-month high around $0.9363
struck on Monday <AUD=D4>.
Sterling fell 0.2 percent to $1.5400 <GBP=D4> after
surprisingly weak house price data. []
(Additional reporting by Charlotte Cooper and Reuters FX
analyst Rick Lloyd in Singapore; Editing by Michael Watson)
