TOKYO: The dollar and euro's rally against the yen retreated in afternoon Asian trade on Friday, after earlier soaring on monetary easing comments from the man tipped to become Japan's next premier.
The dollar weakened to 80.99 yen in Tokyo from 81.16 yen in New York late Thursday, while the euro bought 103.41 yen, down from 103.69 yen in US trade.
The European currency fetched $1.2767 against $1.2778 in New York after it weathered widely expected news that the 17-nation eurozone tipped back into recession in the third quarter.
On Thursday, the yen sank after Shinzo Abe, head of the Liberal Democratic Party, called for "unlimited" easing by the Bank of Japan, and vowed to strike an agreement with the central bank over further policy measures if he wins the country's top political job after a December 16 election.
But the comments have stoked questions about how Abe would force such a deal on the Bank of Japan, which is independent from the government.
"Mr. Abe's remarks propelled the dollar up yesterday. But people here are having second thoughts about whether his ideas really will be implemented," Takahiro Iizuka, a trader at Mizuho Trust and Banking, told Dow Jones Newswires.
Prime Minister Yoshihiko Noda was set to dissolve the lower house of parliament Friday ahead of the polls.
Recent opinion surveys showed his centre-left Democratic Party of Japan would come off badly against Abe's conservative LDP.
The Japanese government lowered its domestic economic assessment for a fourth straight month in a report issued Friday, underlining fears about a slowdown in the world's third-largest economy.
Finance Minister Koriki Jojima said Noda had instructed lawmakers to compile a fiscal stimulus package by November 30 to support the economy.
Data out of Europe was relatively downbeat Thursday, with the eurozone technically returning to recession.
"However, this was as expected, and Germany managed a little better positive growth than expected," National Australia Bank said.
The dollar was mostly higher against other Asia-Pacific currencies.
It rose to 54.99 Indian rupees from 54.92 rupees on Thursday, to 1,090.80 South Korean won from 1,087.90 won and to 30.75 Thai baht from 30.71 baht.
The greenback also gained to Tw$29.11 from Tw$29.07, to Sg$1.2278 from Sg$1.2230 and to 41.32 Philippine pesos from 41.21 pesos. It was unchanged at 9,625 Indonesian rupiah.
The Australian dollar changed hands at $1.0330 from $1.0376, and China's yuan gained to 13.00 yen from 12.97 yen.
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