FOREX-Yen jumps as Abe resignation sparks political uncertainty

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Eimi Yamamitsu
TOKYO, Aug 28 (Reuters) - The yen bounced off a two-week low
on Friday following news that Prime Minister Shinzo Abe is set
to resign, while the dollar struggled to make headway elsewhere
as the prospect of low U.S. rates for a long time weighed on the
greenback.
Abe, the nation's longest serving premier, will step down
due to his worsening health, a source close to a ruling party
official said on Friday. There had been speculation about his
health all week. The yen JPY= , which had been falling, leapt about 0.5% to
a session-high of 106.10 per dollar on the news before easing a
fraction to 106.32.
The yen is regarded as a safe-haven currency by virtue of
Japan's status as the world's biggest creditor nation. Analysts
said it jumped on news of Abe's resignation because the
political uncertainty might prompt Japanese investors to bring
money back home and convert it into yen.
"There's some nervousness and concerns because he's the
longest serving Prime Minister, and with him gone there could be
some uncertainty," said Bank of Singapore currency analyst Moh
Siong Sim.
"Perhaps Abenomics is coming to a close," he said. "And
perhaps we could see some repatriation and this is why the yen
has strengthened somewhat."
Sim added, though, that he did not foresee a lasting impact
on the yen because any successor would likely be an Abe ally.
"I'm not convinced it would have a lasting impact on the yen
Speculation about Abe's health and tenure had risen after he
made two visits to a hospital recently. He has battled the
chronic disease ulcerative colitis for years.
The news knocked yen crosses and the Japanese equity market
but has not seemed to dim trade in other currencies.
The dollar faced pressure in Asia following a speech from
Federal Reserve Chair Jerome Powell in which he said the central
bank would adopt an average inflation target - meaning rates are
likely to stay low even if inflation rises a bit in future.
An overnight jump in U.S. yields, as markets priced in
higher inflation, had supported the greenback early in the Asia
session. But as the day wore on investors turned dollar sellers
once more, figuring U.S. rates would be low for a long time and
stay there even if inflation picks up.
The Australian dollar AUD=D3 rose 0.5% to a 20-month peak
of $0.7303 and the kiwi NZD=D3 rose by the same margin to
$0.6668.
The euro EUR=EBS added 0.4% to $1.1867, as investors
seemed to shrug off a rise in U.S. yields to return to selling
dollars. The pound GBP= rose half a percent to $1.3260.
Powell said the Fed will seek to achieve 2% inflation on
average, so that periods of super-low inflation would likely be
followed by an effort to lift it over 2% for some time.
"Jay Powell's speech is bearish for the dollar over the
medium-to-long term because U.S. real interest rates will have
room to fall further into negative territory," said CBA currency
analyst Joe Capurso.