* Dollar comes off four-year peak vs yen just below 100
* Euro rises as Italy 3-year debt costs fall at auction
* Yen slides against higher-yielding Australian, NZ dollars
By Julie Haviv
NEW YORK, April 11 (Reuters) - The dollar hovered close to a four-year high against the yen on Thursday, with a climb above the key 100 yen level highly expected given the massive amount of bonds the Bank of Japan plans to buy to buoy its economy.
The dollar has gained a whopping 7 percent since the BoJ pledged last week to inject about $1.4 trillion into the Japanese economy to end decades-long deflation and achieve its 2 percent inflation target.
While the pace of the rally has slowed due to option barriers at 100 yen, a psychologically-significant level for the market, most analysts believe it is only a matter of time until that mark is reached.
The dollar has not risen above 100 yen since April 2009.
"I think there's trepidation going above 100 because we've gone so quickly ... in the wake of the BoJ decision," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
BoJ Governor Haruhiko Kuroda's comments on Wednesday that there would be no additional stimulus in coming months and that policymakers are closely monitoring financial markets also limited near-term losses in the yen, some analysts said.
While the Japanese central bank's action will lead to a weaker currency, Woolfolk said a rapid fall in the yen could hurt the credibility of the BoJ in the medium term.
"The attempt here is not to prompt speculators to debase the currency. That's not the purpose. The purpose is to end deflation and to provide a springboard for renewed growth and employment in Japan," he said.
The dollar was last trading flat at 99.82 yen, not far from the session high of 99.85. It reached 99.87 yen on Wednesday, its highest level since April 2009.
Traders cited hefty offers to sell dollars at 100 yen from Japanese exporters. They added, however, that most investors were looking to use dips to add to long-dollar positions.
A rise above 100 yen would open the door for a test of the April 2009 peak of 101.45 yen, analysts said.
The euro rose to its highest against the yen in more than three years, hitting 131.00 yen on Reuters data, and was last trading up 0.4 percent on the day at 130.92.
Ulrich Leuchtmann, head of currency research at Commerzbank in London, said it was possible that the dollar could rise to 115 yen or higher by year-end, but added it was difficult to predict the extent of the move.
"The 100 yen level is a psychological level that might take a bit of time to break, but this is still a very significant qualitative change by the Bank of Japan that is not fully priced in yet," said Leuchtmann.
Japan's aggressive monetary easing contrasts with expectations the Federal Reserve may slow its bond buying later this year. These expectations were given a boost as minutes from a recent Fed meeting released on Wednesday showed a few U.S. policymakers looking to taper asset purchases by mid-year.
Against the dollar, the euro rose 0.4 percent to $1.3118, after a session peak of $1.3138, the highest since the end of February as Italian three-year debt costs eased to their lowest since January at an auction.
Speculation was growing that the BoJ's ultra-loose policy would drive Japanese investors to riskier and higher-yielding foreign assets, with the euro one of the beneficiaries.
So far, however, there was little evidence of that happening. Data from Japan's Ministry of Finance showed Japanese investors sold a net 1.145 trillion yen ($11.5 billion) worth of foreign bonds last week, the highest sales in a year.
The yen was particularly softer against higher-yielding currencies, such as Australian and New Zealand dollars, as investors borrow in yen cheaply and use the proceeds to invest in such higher-yielding currencies in what are known as carry trades.
The Australian dollar rose to a five-and-a-half year high against the yen while the New Zealand dollar hit its strongest since early 2008.