FOREX-Yen sets 2-1/2-year low as Japan PM keeps pressure on BOJ
* Abe says BOJ must set 2 pct medium-term inflation goal
* Dollar/yen hits highest since June 2010
* Breach of 89.50 options barrier adds to dollar's momentum
* Euro hits strongest since Feb 2012 vs dollar
* Rise above weekly Ichimoku cloud helps buoy euro -trader
SINGAPORE, Jan 14 (Reuters) - The yen hit a 2-1/2-year low versus the dollar on Monday after Japanese Prime Minister Shinzo Abe urged the Bank of Japan to set a medium-term inflation target, in a reiteration of his calls for forceful monetary stimulus.
In comments that came ahead of the BOJ's policy meeting on Jan. 21-22, Abe said on Sunday that the BOJ must set a 2 percent inflation target and make it a medium-term goal rather than a long-term objective.
Abe also said on Japanese public broadcaster NHK that he will meet with monetary policy experts on Tuesday to seek views on who would be suitable as next BOJ governor.
Abe's government has the power to nominate a successor to BOJ Governor Masaaki Shirakawa when his term expires in April, although the nomination needs approval by both houses of parliament.
While some market players said Abe's comments did not seem particularly new and attributed the yen's drop on Monday to the breach of a dollar/yen options barrier, others said the new Japanese prime minister's latest call for aggressive monetary easing helped drag the yen lower.
The dollar rose to as high as 89.67 yen on trading platform EBS as of 0557 GMT, the greenback's highest level versus the Japanese currency since June 2010.
"The confirmation that there's going to be a push for a new (BOJ) governor, that new governor is going to have a mandate of 2 percent inflation, that plus the fiscal stimulus is a major negative for the yen," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.
Japan last week approved a $117 bln stimulus package, the biggest spending boost since the financial crisis, to try and support the economy.
The dollar last changed hands at 89.61 yen, up 0.5 percent from late U.S. trade on Friday. Market players said the dollar breached an options barrier at 89.50 yen, and there was talk of another barrier at 90.00 yen.
On technical charts, the dollar faces resistance in the 89.70 yen to 90.70 yen area, a zone that contains a Fibonacci retracement level and other resistance levels.
Rob Ryan, strategist for RBS in Singapore, said the dollar could retreat against the yen after the BOJ's policy meeting next week, if its policy decision is regarded as a disappointment.
"You know the positioning is pretty stretched at this stage," Ryan said, adding that expectations for the BOJ meeting seemed to be "sky high".
With the yen in retreat, the euro rose 0.8 percent to 120.00 yen. Earlier, the euro hit a high of 120.13 yen, the single currency's highest level versus the yen since May 2011.
Against the dollar, the euro rose to as high as $1.3404, the European unit's strongest level since February 2012. The euro last changed hands at $1.3389, up 0.3 percent on the day.
The euro has rallied after European Central Bank President Mario Draghi, in a news conference last Thursday, gave no indication that the ECB would cut interest rates in the near future.
Draghi's comments had disappointed euro bears who thought that the ECB would be inclined to cut interest rates in coming months to shore up the wobbly euro zone economy.
A trader for a Japanese bank in Singapore said the euro's climb above a resistance level on the weekly Ichimoku chart, a technical analysis tool that is widely used among traders, helped boost the euro on Monday.
The euro had finished last week above resistance near $1.3327, the top of the weekly Ichimoku cloud.
Later on Monday, investors will turn their focus to a speech by U.S. Federal Reserve Chairman Ben Bernanke, watching for any fresh hints on how long the Fed's asset-buying programme might last.
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