FOREX-Yen firms before G20, euro slips
* Yen hits 2-week high against euro, 1-week high vs dollar
* Russia says G20 communique won't single out Japan on forex
* BOJ nominees awaited, less radical Muto seen front runner
* Euro slips to 3-week low versus dollar
LONDON, Feb 15 (Reuters) - The yen hit a two-week high against the euro on Friday on speculation the next Bank of Japan governor may be less inclined to pursue aggressive monetary and amid uncertainty before a G20 summit in Moscow.
G20 officials struggled to find common ground on currency manipulation at a summit which looked likely to be dominated by the ultra-loose monetary polices of major developed countries, including Japan and the United States and whether they depart from the group's commitment to market-driven exchange rates.
The possibility of officials expressing disapproval of Japan's policy in particular has encouraged investors to take profit on the yen's recent sharp falls, which followed government pressure on the BOJ to ease policy to help beat deflation.
Sources told Reuters that former top financial bureaucrat Toshiro Muto was the frontrunner to become the next BOJ governor.
Muto is seen as likely to pursue slightly less radical stimulus measures than some of the other contenders. A decision could come in the next few days, the sources said.
The euro was down 0.6 percent on the day at 123.35 yen, having fallen to 122.90 yen on trading platform EBS, its lowest since Jan. 30. It hit a 34-month high of 127.71 last week.
"Reports that Muto is the favoured candidate to take over as Bank of Japan governor is the main reason for the yen's recovery," said Arne Lohmann Rasmussen, head of FX research at Danske Bank in Copenhagen.
However, he expected the yen's gains to be "relatively short-lived" given prospects of looser monetary policy.
The euro also remained under pressure a day after figures showed the euro zone sinking more deeply into recession than forecast. The grim picture is likely to keep expectations of a interest rate cut by the European Central Bank alive.
Euro zone money market rates are also likely to ease in coming weeks -- all of which should keep the euro well off its recent highs above $1.37 struck on Feb 1.
The euro fell 0.3 percent to $1.3307, its lowest since Jan. 24, with traders saying stop loss less orders were triggered on the drop below $1.3320.
ECB chief Mario Draghi criticised on Friday recent "chatter" on currencies and said the euro's exchange was in line with long-term averages. Like ECB policymaker Jens Weidmann, who spoke earlier, Draghi resisted pressure from some euro zone politicians to target the euro's exchange rate on the grounds it is overvalued.
Traders and analysts said some market participants had been eager to use Muto's likely nomination as a reason to cover their short yen positions before the G20 meeting.
Speculation over what, if anything, G20 officials might say about Japan has been swirling all week.
Russia's finance "sherpa", Deputy Finance Minister Sergei Storchak, said the drafting discussion was proving "difficult", but the final text would not single out Japan for criticism. . That could see yen selling resume.
The dollar was down 0.3 percent at 92.60 yen, having hit a one-week low of 92.22 yen. It had set a 33-month high of 94.465 set on Monday and solid chart support was expected at 92.00 yen.
"The long term weakening trend for the yen remains intact," said Howard Jones, adviser at money managers RMG Wealth Management. "We are comfortable with our view the dollar will rise to 100 yen in the coming months. It is an easy trade to make money."
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