(Updates prices, adds quotes, links and graphics; changes dateline, previous LONDON; changes byline)
* Yen falls to 7-month low versus dollar of 80.37 yen
* Dollar resistance around 80.40 yen seen as key
* Euro zone services PMI disappoints, Greece concerns persist
* Sterling falls after BoE minutes
NEW YORK (Frankfurt: A0DKRK - news) , Feb 22 (Reuters) - The yen skidded to a seven-month low against the dollar on Wednesday, with more weakness expected as recent monetary easing in Japan (EUREX: FMJP.EX - news) , a rise in oil prices and interest rate differentials weigh on the currency.
The euro was flat against the greenback as market participants continued to weigh the implications of Greece's bailout deal and a euro zone economy that is teetering on the brink of a recession.
The yen has been on the defensive since the Bank of Japan's surprise move to boost its asset buying program last week. Some analysts said the move could mark the end of the yen's long-term uptrend that prompted Japan to intervene in the currency market three times last year.
"We are looking at a sea change in the strength of the yen," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
"Japanese life insurers have been removing their hedges since last week and that is putting pressure on the yen," he said. "The Bank of Japan's movement to inject additional QE (quantitative easing) has been weighing and its setting of an inflation target sets the stage for even more QE."
The drop in the yen has also been mirroring rising yields in U.S. Treasury securities, at the short end in particular. Oil prices were at a 9-month high and also weighed on the yen.
"Japan lost a great deal of nuclear power after last year's earthquake, so the rise in oil prices is also a factor."
The dollar hit a peak of 80.37 yen, its highest since mid-July, with traders citing buying by Japanese importers and offshore players. This took it beyond highs hit in October and August after Japanese authorities acted to curb yen gains.
Comments from a Japanese Ministry of Finance official that there was still a risk of the yen rising, and that Japan would continue to monitor currency moves carefully and would respond as needed, added to broad yen weakness.
The dollar faced resistance around 80.38 yen, the July 12 high, with traders reporting demand to sell around that level and ahead of an options barrier at 80.50 yen.
The dollar has risen roughly 5 percent against the yen so far in February, putting it on track for its biggest monthly percentage gain since March 2010. The euro rose to a three-month peak of 106.32 yen, its highest since mid-November (Stuttgart: A0Z24E - news) , and was last up 0.7 percent at 106.26 yen.
DANGER OF EURO ZONE RECESSION
But the euro retreated from near two-week highs against the dollar hit the previous day as optimism over the long-awaited Greek bailout deal reached early on Tuesday gave way to concerns about economic growth and implementation risks.
Data on Wednesday indicated the euro zone economy is in danger of tipping into recession, with the services sector shrinking this month along with manufacturing.
Surveys of purchasing managers showed unexpectedly weak activity in the region's most powerful economy, Germany, and in France.
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Euro zone PMI & GDP growth: http://link.reuters.com/rud84s
France PMI & GDP growth: http://link.reuters.com/vuv26s
German PMI, IFO & GDP growth: http://link.reuters.com/puq93S
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The euro was steady at $1.3232, below Tuesday's high of $1.3293, its highest level since Feb. 9. Since late January the euro has traded in a range roughly between $1.30 and $1.33.
But the euro rose to a two-month high against sterling as the UK currency fell after Bank of England minutes showed two votes for larger asset purchases this month, increasing the risk of more easing later this year.
Market attention was also focused on the European Central Bank's next long-term refinancing operation next week. The ECB is expected to lend nearly 500 billion euros to banks, although some forecasts were as high as 1 trillion.
"If the take-up is higher I think the euro goes up on that, it plays on more liquidity being positive for risk appetite. We could see it the other side of $1.35, " said Adam Cole, global head of FX at RBC Capital Markets.
"But there's an equally large camp that believes LTROs are close enough to quantitative easing to be more currency-negative the larger they are." (Additional reporting by Nia Williams in London; Editing by Chizu Nomiyama)
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