* Takaichi set to become Japan's first female prime minister * Takaichi's policies may cause delay to BOJ's rate hike plans * Euro hits strongest level against yen since single currency's creation * Fed funds futures imply 94.6% chance of October U.S. rate cut By Gregor Stuart Hunter SINGAPORE, Oct 6 (Reuters) – The yen tumbled against the U.S. dollar by the most in five months in early trading on Monday after Sanae Takaichi won the LDP leadership election at the weekend, setting the country on course for more expansionary fiscal policy and complicating the task facing the Bank of Japan. The yen sank 1.5% to 149.73 yen on the dollar, its biggest one-day slide since May 12, wiping out gains it made in the past week as markets resumed trading in Asia. Against the euro, the Japanese currency fell 1.3% to 175.39 yen, nearing its weakest since the creation of the European single currency. A former economic security and internal affairs minister with an expansionary fiscal agenda for the world's fourth-largest economy, Takaichi's victory puts her on course to become the country's first female prime minister. Her expansionist economic policy has reduced bets that the central bank will hike interest rates this month. Takaichi's win "will likely lead to some weakness in the yen," said Mahjabeen Zaman, head of FX Research at ANZ in Sydney. "There's a lot of political and fiscal uncertainty in the near term and maybe the BOJ may be cautious, despite the data supporting a little bit more of a hawkish stance," she said on a podcast. With many markets in Asia closed for holidays, the dollar index was last at 98.073, retracing some recent losses. The dollar has weakened steadily against its major peers this year as traders attempt to gauge the economic impact of U.S. President Donald Trump's policies and attacks on the independence of the Federal Reserve. Market activity signals that easing at the Fed's October meeting is a near-certainty, with Fed funds futures implying a 94.6% probability of a 25-basis-point rate cut, according to the CME Group's FedWatch tool. Speculators are also pricing a 70% chance that the government shutdown lasts beyond October 15, according to contracts on the betting website Polymarket. The euro stood at $1.1710, down 0.3% so far in Asia, after French Prime Minister Sebastien Lecornu on Sunday named Roland Lescure, a close ally of President Emmanuel Macron, as finance minister in a new government that political rivals threatened to topple quickly if it failed to break with past Macron policies. The kiwi was 0.1% weaker at $0.5823, reversing a six-day winning streak ahead of the Reserve Bank of New Zealand's meeting on Wednesday, where it is narrowly expected to cut its key interest rate by 25 basis points to 2.75%. The Australian dollar fetched $0.65909, down 0.1% in early trade. Sterling was changing hands at $1.34325, down 0.3% so far on the day. The offshore yuan traded at 7.14 yuan per dollar, little changed in early trade. (Reporting by Gregor Stuart Hunter Editing by Shri Navaratnam)
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