* Yen falls as Japan PM resigns; likely successor in focus
* Euro slips; ECB's Noyer says euro not unusually low
* U.S. pending home sales race to 6-month high in April (Adds comments, updates prices)
By Vivianne Rodrigues
NEW YORK, June 2 (Reuters) - The yen fell on Wednesday as the resignation of Japanese Prime Minister Yukio Hatoyama raised concerns about the outlook for the currency, because his likely successor has said in the past he wanted a weaker yen.
The yen hit a two-week low against the dollar after Hatoyama and his deputy resigned to try to boost the ruling party's faltering fortunes in an election next month. [ID:nTOE65100Q]
The euro also fell against the dollar as European Central Bank board member Christian Noyer was cited as saying the single currency's exchange rate against the greenback was at around a 10-year average and "by no means an unusually low level." [ID:nSGE65105R]
The Japanese currency fell as investors focused on Hatoyama's expected replacement, Finance Minister Naoto Kan, who has previously advocated a weak yen. Concerns about political instability were also weighing on the Japanese currency, analysts said.
Kan surprised markets earlier this year by saying he wanted the yen to weaken more and that most businesses favored a dollar/yen rate around 95 yen. Since then he has mostly toed the Finance Ministry line that stable currencies are desirable and markets should set foreign exchange levels.
"Kan is a noted dove who has been an aggressive proponent of a lower yen in order to help stimulate Japanese exports," said Boris Schlossberg, a director of currency research at GFT, in New York.
"With Japanese political situation in state of flux, the dollar may be the only safe-haven instrument left in the currency market for the time being," he added.
In midday trading in New York, the dollar was up 1.4
percent on the day at 92.25 yen
Some analysts said yen losses were limited as investors remained hungry for the Japanese currency, which has benefited from risk aversion stemming from the euro zone debt crisis.
"Almost anything you throw at the yen these days is negative, and yet here we are at these levels. That tells you demand for yen is for reasons other than what's going on in Japan," said Simon Derrick, head of currency research at BNYM.
The dollar also rose as data released on Wednesday showed that pending sales of previously owned homes in the United States topped expectations to hit a six-month high in April. [ID:nN02163984]
"If you look at this (report) from a yield and growth differential perspective, I think it's positive for the dollar," said Michael Malpede, a senior analyst at Easy Forex, in Chicago. "If it weren't for the EU debt crisis, I'd be in the camp that says the Fed moves sooner rather than later" on raising interest rates.
While the report was positive, analysts said the key data remains the government's monthly reading on non-farm payrolls due on Friday.
NOYER COMMENTS
Selling pressure on the euro continued on Wednesday and the
currency fell 0.2 percent to $1.2201
Analysts at ScotiaCapital said technical signals on the euro are mixed, but they expect further downside before the currency is able to sustain a rally. The next key level of support is the psychological $1.20, followed by $1.1835, the average level of the euro since its inception.
The euro hit a four-year low of $1.2110 on Tuesday, and remains sensitive to any signs the euro zone sovereign debt crisis might spread to the banking system of the 16-nation region.
Euro/dollar risk reversals are at extreme levels, showing a bias for puts at a bid of -3.5 on Wednesday, according to GFI data. Wednesday's figure was, however, off the highs from two weeks ago, which was at -3.73, the most bearish investors had ever been on the euro since GFI made its data available to Reuters in early 2007.
"Very few investors are ready to put on long euro/dollar positions, and any spikes are due to profit taking on short positions," said Niels Christensen, currency strategist at Nordea in Copenhagen. (Additional reporting by Steven C. Johnson and Nick Olivari in New York and Jessica Mortimer in London; Editing by Leslie Adler)