FOREX-Yen hits 7-mth low vs dlr; euro outlook cautious

(Updates prices, adds detail)

* Yen falls to 7-month low versus dollar of 80.37 yen

* Dollar resistance around 80.40 yen seen as key

* Euro zone PMI disappoints, Greece concerns persist

* Sterling falls after BoE minutes

LONDON, Feb 22 (Reuters) - The yen hit a seven-month low against the dollar on Wednesday and looked set to stay under pressure after recent monetary easing in Japan (EUREX: FMJP.EX - news) , while the euro struggled against the greenback as markets assessed implications of Greece's bailout deal.

The dollar hit a peak of 80.37 yen, its highest level 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 took steps to curb yen gains.

The yen has been on the defensive since the Bank of Japan's surprise move to boost its asset buying programme 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.

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 initial rebound in our view is a position adjustment following the BoJ's announcement of their shift in policy," said Ian Stannard, head of European FX strategy at Morgan Stanley (EUREX: DWDF.EX - news) .

"The sustainability of that move is a function of whether we see a change in the behaviour of Japanese investors. A rise in U.S. rate expectations would be a trigger point for another sharp move higher."

Further gains could be hard-won, with exporters looking to sell into a stronger dollar. 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.

Morgan Stanley recommended selling the dollar at 80.40, targeting 77.75, but with a tight stop loss order at 80.65 yen.

"If we start to move above that level we will probably switch to bullish strategies," said Stannard.

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.

In addition to the BOJ's monetary easing, the yen has come under pressure after data showed that Japan's current account surplus -- a major and constant support for the yen -- fell to a 15-year low last year.

GREECE CONCERNS PERSIST

The euro rose to a three-month peak against the Japanese currency of 106.33 yen, its highest since mid-November (Stuttgart: A0Z24E - news) , and was last up 0.55 percent at 106.13 yen.

But it 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.

The euro was steady at $1.3241, below Tuesday's high of $1.3293, its highest level since Feb. 9. It faced resistance at $1.3306, the 100-day moving average. Since late January the euro has traded in a range roughly between $1.30 and $1.33.

The euro also came under pressure from surveys showing the euro zone economy in danger of falling into recession as services sector activity shrank along with manufacturing.

But it rose to a two-month high against sterling of 84.42 pence 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 Jessica Mortimer; Editing by John Stonestreet)

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FOREX-Yen slips to 7-mth low vs dlr; euro zone outlook bleak

(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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FOREX-Euro firms but outlook grim on spreading debt crisis

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* Short covering boosts euro ahead of weekend

* Debt crisis still points to weaker single currency

* Interbank funding strains boost dollar demand (Updates levels, adds details, comments)

LONDON, Nov 18 (Reuters) - The euro rose against the dollar on Friday as investors unwound bearish bets on the single currency to book profits ahead of the weekend but, with the euro zone debt crisis escalating, appetite to sell on upticks was high.

Pressure was mounting on the European Central Bank to step up its bond-buying programme with Italian and Spanish bond yields close to unsustainable levels and plummeting demand from other, real-money investors.

Until a solution emerges that makes the ECB the lender of last resort, any gains in the euro are likely to be fleeting.

"With so much up in the air there's nothing else to focus on apart from the immediate, which is that the euro zone looks to be heading into the precipice. Ahead of the weekend I don't think anyone is ready to counter that view," Jane Foley, senior currency strategist at Rabobank.

The euro rose 0.4 percent to $1.3510, not far from its five-week low of $1.3421 struck on Thursday and still down roughly 2 percent for the week.

Support for the single currency lies at around $1.3405, the 76.4 percent retracement of last month's rally from around $1.3145 on Oct (KOSDAQ: 039200.KQ - news) . 4 to a high of $1.4248 on Oct. 27. Large option expiries at $1.3500 and $1.3550 are also likely to sway trade.

"The market has an appetite to take on new shorts because without the ECB there doesn't seem to be any other buyer in the European sovereign debt market," Foley said.

Bond market experts polled by Reuters saw a 50/50 chance that the ECB will expand bond purchases to engage in outright quantitative easing.

Prospects for the euro have dimmed this week on signs that the crisis was spreading to core euro zone countries such as France, with most investors still looking to sell into every rally.

With German bond yields no longer falling as peripheral yields rise, analysts suggested that portfolio adjustments were not just moving from peripheral debt to core Bunds, but that investors were abandoning the euro zone altogether.

Traders say that since the bulk of investors have already been running bearish positions on the euro in the past few months there is limited scope for the currency to fall further, despite what some politicians have described as the worst crisis in the region since World War II.

While highlighting the risk that the short squeeze could push euro/dollar higher in the near term, Commerzbank (EUREX: CBKF.EX - news) strategists said the prevailing trend was for a lower euro.

"Courageous market participants can sell the euro around $1.3550-60, we would start shortening euro/dollar at $1.3650," the bank said in a note.

FUNDING STRAINS

With investors shunning euro zone assets, funding strains were increasing for euro zone financial institutions, boding ill for the euro and other riskier assets while offering support for the perceived safety of the U.S. dollar.

The premium for swapping euros into dollars rose, with the three-month cross-currency basis swap hitting 138.5 basis points, the highest since the 2008 financial crisis.

"So far this has not had a dramatic effect on the euro, but it is likely to be behind some of the recent weakening," said FxPro's chief economist Simon Smith.

Analysts said high funding costs were pushing banks into shorter duration funding and could spread into spot currency markets, weighing on the euro.

With most investors preferring safety, the yen outperformed the dollar. The dollar dipped to a two-and-a-half week low against the yen of 76.63 yen.

"Generally safe havens are doing very well at the moment and once you've filled up your exposure on dollars, the yen is the next one in line, irrespective of whether you might be worried about intervention," said Adam Myers, senior FX strategist at Credit Agricole (Milan: ACA.MI - news) in London.

This fall extended the yen's slow creep back towards levels where Japanese authorities intervened on Oct. 31 to weaken the currency. However, Myers said the current pace of strengthening meant another round of intervention was unlikely to come until next year.

The Swiss franc also outperformed the dollar, pushing dollar/Swiss franc down 1 percent on the day to 0.91160 francs. The dollar was last trading at 0.9145 francs, down 0.8 percent on the day. (Additional reporting by Pratima Desai; Editing by Susan Fenton)

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