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The yen sank in Asia Monday on expectations Japan would appoint a new central bank chief in favour of even looser monetary policy, as the pound fell after Britain lost its AAA credit rating for the first time.
The pound at one point fell to $1.5072 -- its lowest since July 2010 -- after Moody's on Friday said it had stripped London of its coveted rating, citing weak growth and rising debt.
The British unit picked up a tad to buy $1.5126 in the afternoon Monday, but well down from $1.5250 before the announcement.
"The pound has fallen through the crucial support line of $1.52," said Yusuke Fujishima, manager of Mitsubishi UFJ Trust and Banking's currency sales department.
"I'm bearish towards the pound in principle... It may have entered a downtrend that could bring it towards the recent low of $1.4231 hit in May in 2010," he added.
In Japan, Prime Minister Shinzo Abe was reported to be planning to nominate Asian Development Bank chief Haruhiko Kuroda to take over as Bank of Japan head, as its current governor Masaaki Shirakawa gets set to step down next month.
Kuroda has been a stern critic of the bank and his nomination was likely to open the door to more aggressive easing demanded by the new government, a key part of its plan to stoke the world's third-largest economy.
"Kuroda's nomination has triggered yen-selling," Osao Iizuka, head of forex trading at Sumitomo Mitsui Trust Bank, told Dow Jones Newswires.
In afternoon Tokyo trade, the dollar bought 94.18 yen, from 93.37 yen in New York late Friday, while the euro sat at 124.24 yen from 123.18 yen.
The European single currency bought $1.3197 against $1.3189 as markets look to the results of Italian elections expected later in the day.
Abe and Shirakawa disagreed on policy matters with the under-pressure bank governor leaving the post about three weeks before the end of his term.
The premier had openly said he wanted a more like-minded head of the central bank and threatened to rein in its independence if policymakers did not toe the line on his government's prescription for reviving Japan's limp economy: big spending and aggressive policy easing.
The yen has seen a steep decline in recent months, stoking criticism abroad, particularly in Europe, that Tokyo was engineering the fall to help its exporters. Japanese officials denied the claims.
Markets were keeping a close eye on the Italian election, with investors concerned the polls could see a divided legislature as Italy struggles with austerity budgets and persistent recession.
In China data showed the country's manufacturing growth slowed to a four-month low in February, while US Federal Reserve Chairman Ben Bernanke was due to give testimony to the Senate Banking Committee testimony on Tuesday.
Euro sentiment had been strong on upbeat business confidence data in Germany, but the unit's gains were held back after the European Central Bank said the region's weak lenders were holding on to much higher levels of ECB emergency funding than previously expected.
The dollar was mixed against other Asia-Pacific currencies. It rose to Sg$1.2390 Monday afternoon from Sg$1.2380 Friday, to Tw$29.66 from Tw$29.59 and to 1,086.96 South Korean won from 1,084.68 won.
It also rose to 29.84 Thai baht from 29.82 baht and to 9,709 Indonesian rupiah from 9,708 rupiah but fell to 40.71 Philippine pesos from 40.72 pesos and to 54.08 Indian rupees 54.45 rupees.
The Australian dollar fell to $1.0281 from $1.0313 while the Chinese yuan changed hands at 15.09 yen against 14.96 yen.