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By Amanda Cooper LONDON (Reuters) -The yen headed for its steepest weekly drop in a year on Friday, as the chances of a near-term rate hike faded, while the euro was rooted near two-month lows by political crisis in France. The yen edged up 0.2% to 152.7 per U.S. dollar but was still close to its weakest since mid-February, heading for a 3.5% drop in the week, its biggest decline since last October. Its drastic drop has been triggered by concerns that the Bank of Japan may not hike interest rates again this year after fiscal dove Sanae Takaichi's surprise victory to lead the ruling party, stoking worries of Japanese authorities needing to step in to support the yen. Japanese Finance Minister Katsunobu Kato said on Friday that the government was concerned about excessive volatility in the foreign exchange market. Takaichi said on Thursday she did not want to trigger excessive declines in the yen. "The Ministry of Finance is very sophisticated, they're very experienced, and I think they would use verbal intervention beforehand. And in a way, I think they have," Rabobank chief strategist Jane Foley said. Takaichi said on Thursday that the BOJ is responsible for setting monetary policy but that any decision it makes must align with the government's goal. She looked set to become Japan's first female prime minister in a parliament vote that was expected on October 15. But the date will be likely pushed back after the Liberal Democratic Party's junior coalition partner Komeito pulled its support, breaking their 26-year-old alliance.  Traders are currently pricing an about 45% chance of a rate hike from the BOJ in the December meeting and are only fully pricing in a 25-basis-point hike in March. FRENCH DRAMA DENTS EURO The euro headed for its biggest weekly decline in 11 months, but managed to edge up 0.2% to $1.1586, near its lowest for two months. Political turmoil in France has weighed heavily on the single currency in the last week. President Emmanuel Macron is searching for yet another prime minister, hoping his next pick – the sixth in under two years – can steer a budget through a legislature riven by crisis. The political paralysis has made it deeply challenging to pass a belt-tightening budget and has made investors increasingly worried about France's yawning deficit, on top of evidence of slowing momentum in other key economic engines such as Germany. "The data from Germany's not good, and therefore I think that makes the euro a little bit more susceptible to wobbles on the French news," Rabobank's Foley said. As a result, the dollar index, which measures the U.S. currency against six others, neared two-month highs around 99.24 and headed for a weekly rise of 1.7%, its biggest in a year. "The recent dollar rally has gone against market positioning and prompted a partial covering of USD shorts," said Chris Weston, head of research at Pepperstone. "There remains a high degree of scepticism that the USD can materially push through 100, a level in the dollar index that was quickly reversed in May," he said in a note. With the U.S. government shutdown continuing and little to no economic data for investors to parse through for clues on the path the Federal Reserve is likely to take, markets are keeping an eye on comments from policymakers. The influential New York Federal Reserve President John Williams signalled on Thursday he would be comfortable with cutting interest rates again, despite some policymakers' qualms about rising inflation that suggest such a decision would not be easily made. Traders are pricing in a 95% chance that the Federal Reserve cuts rates by 25 bps at its October meeting, while the odds of an additional cut in December have dropped to 80%, from 90%, in the past week, according to the CME Group's FedWatch Tool. (Additional reporting by Ankur Banerjee in Singapore; Editing by Jacqueline Wong, Kim Coghill and Emelia Sithole-Matarise)

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BEIJING (Reuters) -China dramatically expanded its rare earths export controls on Thursday, adding five new elements and extra scrutiny for semiconductor users as Beijing tightens control over the sector ahead of talks between Presidents Donald Trump and Xi Jinping. The world's largest rare earths producer also added dozens of pieces of refining technology to its control list and announced rules that will require compliance from foreign rare earth producers who use Chinese materials. The Ministry of Commerce's announcements follow U.S. lawmakers' call on Tuesday for broader bans on the export of chipmaking equipment to China. They expand controls Beijing announced in April that caused shortages around the world, before a series of deals with Europe and the U.S. eased the supply crunch. "The White House and relevant agencies are closely assessing any impact from the new rules, which were announced without any notice and imposed in an apparent effort to exert control over the entire world's technology supply chains," a White House official told Reuters on Thursday. The new curbs come ahead of a scheduled face-to-face meeting between Trump and Xi in South Korea at the end of October. "This helps with increasing leverage for Beijing ahead of the anticipated Trump-Xi summit in (South) Korea later this month," said Tim Zhang, founder of Singapore-based Edge Research. China produces over 90% of the world's processed rare earths and rare earth magnets. The 17 rare earths are vital materials in products ranging from electric vehicles to aircraft engines and military radars. Exports of 12 of them are now restricted after the ministry added five – holmium, erbium, thulium, europium and ytterbium – along with related materials. Foreign companies producing some of the rare earths and related magnets on the list will now also need a Chinese export licence if the final product contains or is made with Chinese equipment or material. This applies even if the transaction includes no Chinese companies. The regulations mimic rules the U.S. has implemented to restrict other countries' exports of semiconductor-related products to China. It was not immediately clear how Beijing intends to enforce its new regime, especially as the U.S., the European Union and others race to build alternatives to the Chinese rare earth supply chain. "We're likely entering a period of structural bifurcation — with China localizing its value chain and the U.S. and allies accelerating their own," said Neha Mukherjee, a rare earths analyst with Benchmark Mineral Intelligence. In a nod to concerns about supply shortages, the ministry said the scope of items in its latest restrictions was limited and "a variety of licensing facilitation measures will be adopted". China's latest restrictions on the five additional elements and processing equipment will take effect on November 8, just before a 90-day trade truce with Washington expires. The rules on foreign companies that make products using Chinese rare earths equipment or material are to take effect on December 1. Shares in China Northern Rare Earth Group, China Rare Earth Resources and Technology and Shenghe Resources surged by 10%, 9.97% and 9.4%, respectively, on Thursday. Shares in U.S.-based rare earths companies jumped as well in New York afternoon trading, with Critical Metals Corp gaining 25%, Energy Fuels adding 9%, MP Materials gaining 2.5% and USA Rare Earth up 15%. Energy Fuels, which owns a uranium and rare earths processing facility in Utah, said in a statement to Reuters that it is working to boost U.S. rare earths production and that its recent pilot project "showcases the technical capabilities of an American company on American soil." NioCorp, which is developing a Nebraska rare earths mine, said: "It's clear that the People's Liberation Army is increasingly calling the shots on rare earth policy in China. That means even more difficult times both for the Pentagon and for a wide range of commercial manufacturers." CHIPS AND DEFENSE The ministry also said overseas defense users will not be granted licences, while applications related to advanced semiconductors will be approved on a case-by-case basis. The new rules apply to 14-nanometer chips or more advanced chips, memory chips with 256 layers or more, and equipment used in production of such chips, as well as to related research and development. These advanced chips are used in products from smartphones to AI chipsets that require powerful computing performance. The rules will also apply to research and development of artificial intelligence with potential military applications. South Korea, home to major memory chipmakers Samsung Electronics and SK Hynix, is assessing the details of the new restrictions and will continue discussions with China to minimise their impact, its industry ministry said in a statement to Reuters. Samsung declined to comment. SK Hynix and Taiwan's TSMC did not immediately respond to questions. Shares in TSMC rose 1.8% on Thursday, as the company reported forecast-beating third-quarter revenue. South Korea's financial markets were closed on Thursday for a public holiday. (Reporting by Beijing bureau; Additional reporting by Ernest Scheyder in Houston, Heekyong Yang in Seoul, Eric Onstad in London and Jarrett Renshaw in Washington; Editing by Christian Schmollinger, Kate Mayberry, Tom Hogue, Mark Heinrich, Jason Neely and Marguerita Choy)

(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)