The yen surged as Japan's ruling party picked its next leader while the euro fell following inflation data out of France and Spain.
USD/JPY rose to 146.49 earlier, its highest level since Sept. 3, as traders hedged against the possibility BOJ easing advocate Sanae Takaichi could win the run-off for the leadership of the Liberal Democratic Party.
The pair falls as much as 1.4% to 142.80, after Japan's ruling party picked Shigeru Ishiba as its next leader.
READ: Japan's LDP Picks BOJ Backer Ishiba for PM, Sparking Yen Rally.
One-week risk reversals traded close to parity before rallying to 82 basis points, puts over calls, as the market was caught wrong-footed when it comes to short-term positioning.
EUR/USD drops 0.5% to 1.1125; inflation in France and Spain plunged below 2%, fueling bets that the European Central Bank will speed up the pace of interest-rate cuts.
Money markets now assign an 80% probability for a 25 basis-point cut in October, fully pricing a half-point move by year-end.
The Bloomberg Dollar Spot Index is little changed, as the yen rally offsets weakness in the rest of the Group-of-10 currencies.
US data later Friday include PCE inflation/personal spending, University of Michigan consumer sentiment
US 10-year yield slips around three basis points to 3.77%.
USD/CHF little changed at 0.8460.
GBP/USD down 0.4% to 1.3360; the latest Confederation of British Industry report on UK retail sales is due later Friday. (ayu)
Source : Bloomberg
