* Yen falls as Japan PM Hatoyama says to resign
* Eur/dlr steady; Iran reportedly to sell euros
* Traders wary of taking on more short euro positions
* ECB's Noyer says euro not unusually low
(adds comments, updates prices)
By Jessica Mortimer
LONDON, June 2 (Reuters) - The yen fell on Wednesday after Japanese Prime Minister Yukio Hatoyama resigned, particularly as his likely successor has in the past taken a tougher stance in fighting yen strength.
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]
Analysts said concerns about political instability were weighing on the Japanese currency, though the focus was on Hatoyama's expected replacement, Finance Minister Naoto Kan, because he has previously advocated a weak yen.
Kan surprised markets earlier this year by saying he wanted the yen to weaken more and that most businesses favoured 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.
"If the position does fall to Kan, then the bias will be towards a slightly weaker yen," said Gavin Friend, currency strategist at nabCapital.
At 1042 GMT, the dollar was up 1.1 percent on the day at a
two-week high around 92.00 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.
NOYER COMMENTS
Against the dollar, the euro
Iran's state-owned Press TV said the Iranian central bank would sell 45 billion euros from its foreign exchange reserves to buy dollars and gold. [ID:nnLDE651111]
Traders said there was limited impact on the euro, and some were sceptical about whether Tehran would be able to buy significant amounts of dollars, given that U.S. depository institutions are banned from processing transfers involving Iran.
The dollar <.DXY> rose 0.4 percent against a currency basket to 86.898, hovering near a 15-month high hit on Tuesday.
The euro took a knock earlier after European Central Bank board member Christian Noyer was cited as saying the single currency's exchange rate against the dollar was at around a 10-year average and "by no means an unusually low level". [ID:nSGE65105R]
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 its banking system.
However, it recovered on Wednesday after government sources in Brazil, India, Japan and South Korea said they would not stop investing in the currency. [ID:nTOE650069]
Traders also said investors were wary of renewing short euro positions after taking a hit from the currency's sharp upswing on Tuesday following its slide to a four-year low.
"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 Naomi Tajitsu)