Dollar hovers over record low against euro

TOKYO (AFP) - The dollar came off record lows against the euro in Asian trade Friday while the yen was hobbled by political concerns ahead of key elections, dealers said.

The dollar was at 122.18 yen in late morning trade in Tokyo, up from 121.99 in New York late Thursday.

The euro eased to 1.3798 dollars from 1.3802, continuing to pull back from its record high of 1.3833 on Wednesday. The European single currency gained ground to 168.59 yen from 168.41.

"Although the dollar is being bought against the yen this morning, the US currency still remains weak overall," said Saburo Matsumoto, chief forex strategist of Sumitomo Trust Bank.

"We are watching how long this trend will continue ahead of economic data to be released next week," he said.

US corporate earnings have so far pleased investors and contributed to a rise on equities markets, with Wall Street at an all-time high overnight.

"The US corporate results for the second quarter haven't turned out to be so bad," said Kosuke Hanao, an analyst of forex sales at HSBC.

"This is not a bad environment for investors."

As for the yen, dealers said they were already bracing for the potential defeat of Prime Minister Shinzo Abe's ruling Liberal Democratic Party (LDP) in July 29 upper house elections.

A stinging defeat would likely trigger calls for Abe to step down and could usher in a new period of political uncertainty in the world's second largest economy.

"We will have one more week until the election but the yen is already lower as dealers expect that the LDP will likely lose," Hanao said.

"This shows how much investors are already predicting and digesting the possible impact of the election."

A flurry of public polls have shown Abe's coalition is on course for defeat in the critical elections although polls out Friday showed a slight rebound in his support rate.

Abe, an outspoken conservative who has championed security issues, has watched his support plummet over his 10-month tenure after a slew of scandals and revelations of massive bungling in the pension system.