By Karen Brettell NEW YORK (Reuters) -The dollar was mixed on Thursday as a selloff in the Japanese yen appeared exhausted for now, while the euro was dented by political uncertainty. The yen reached its weakest level since mid-February against the greenback on concerns that Sanae Takaichi, the newly elected head of Japan's ruling party, will introduce more fiscally expansive policies. But the yen got a modest bid on Thursday as traders evaluated how much room she will have to stimulate the economy. “Traders are turning a little bit more sceptical on the Takaichi administration's capacity for passing fiscal stimulus and pushing back against the Bank of Japan's tightening plans,” said Karl Schamotta, chief market strategist at Corpay in Toronto. “That's a reflection of underlying inflation dynamics in Japan. The reality is that Japanese households are agitating for change because inflation is running at elevated levels,” Schamotta said. Takaichi said on Thursday she will immediately issue an order to compile a package of steps to cushion the economic impact of rising living costs once chosen by parliament to become next prime minister. The dollar was last flat on the day at 152.67 yen after earlier reaching 153.21, the highest since February 13. The euro, meanwhile, has dropped since Prime Minister Sebastien Lecornu tendered his and his government's resignation on Monday. The political paralysis has made it challenging to pass a belt-tightening budget sought by investors that are increasingly worried by France's expanding deficit. French President Emmanuel Macron’s office said on Wednesday he would appoint a new prime minister within 48 hours. The single currency was last down 0.15% at $1.1608. The dollar index gained 0.15% to 99.00 and reached 99.10, the highest since August 1. The dollar is being aided by some more hawkish commentary by Federal Reserve officials. Minutes from the U.S. central bank’s September meeting released on Wednesday showed that officials agreed that risks to the U.S. job market had increased enough to warrant an interest rate cut but remained wary of high inflation. “We are seeing a more hawkish tone from Fed policymakers, both in the minutes from September's meeting as well as ongoing commentary. And that's pushing back on market expectations for further aggressive easing,” said Schamotta. Traders are pricing in a 95% chance that the Fed cuts rates by 25 basis points at its October 28-29 meeting, while the odds of an additional cut in December have dropped to 82%, from 90%, in the past week, according to the CME Group’s FedWatch Tool. New York Fed President John Williams backs more interest rate cuts this year given the risk of a further slowdown in the labor market, he said in an interview published by the New York Times on Thursday. Traders are also focused on how long the U.S. federal government shutdown will last, with the economy likely to take a bigger hit the longer it drags on. The U.S. Internal Revenue Service said on Wednesday it will furlough more than 34,000 employees due to the government shutdown, effectively shuttering taxpayer call centers. In cryptocurrencies, bitcoin gained 0.44% to $123,478.87. (Reporting by Karen Brettell; Additional reporting by Joice Alves and Ros Russell)
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