* Euro vs dollar hits strongest since February 2012
* Euro vs yen hits highest since May 2011
* Yen slumps broadly on Bank of Japan expectations
* Fed Chairman Ben Bernanke speech eyed
By Julie Haviv
NEW YORK, Jan 14 The euro rose against the dollar for a third straight session on Monday, touching an 11-month high, as investors continued to trade off of diminished expectations of monetary easing from European Central Bank.
The single currency shared by 17 European countries also extended gains against the yen, touching its highest level since May 2011, as Japan's government applied more pressure on its central bank to ease monetary policy, contrasting sharply with ECB policy.
ECB President Mario Draghi's upbeat tone since its policy-setting meeting last Thursday has pushed the euro 2.4 percent higher against the greenback. The recent gains account for most of the euro's 1.3 percent appreciation so far in 2013.
Draghi suggested an interest rate cut was off the agenda for now and pointed to signs of improvements in the euro zone economy as well as in financial markets, which set a supportive tone for the euro.
Some strategists, however, believe the euro's impressive gains have been too swift, leaving the unit vulnerable to a pullback.
"Investors are consolidating after last week's huge rally, which is why the euro has come down from its highs of the day," said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.
Declining borrowing costs for highly-indebted Spain and Italy have allayed fears about the euro zone's debt crisis, but the region's economic backdrop remains unimpressive. Output at euro zone factories fell for a third straight month in November.
"This data is a reminder that the region's economy remains fragile and weak," he said. "Draghi managed to push back expectations of easing, but if we continue to see soft data like this, the possibility of an ECB rate cut becomes more probable."
The euro was last up 0.2 percent against the dollar at $1.3364, retreating from a high of $1.3403, its strongest since late February 2012.
Thin also said $1.35 is a key level for the currency pair since it would mark a break out of the 2012 range of roughly $1.2040 to $1.3486.
Waning worries about peripheral euro zone debt left room for further gains in the euro, traders and analysts said. It rose to a 13-month high against the safe-haven Swiss franc.
"We are seeing a positive environment for the euro and expect it to hit $1.35 in the three months," said Marcus Hettinger, global FX strategist at Credit Suisse in Zurich.
Draghi's comments in Europe contrast with Japan, where Prime Minister Shinzo Abe said on Sunday the central bank must set 2 percent inflation target as a medium-term, not long-term, objective.
This indicates the central bank would have to print more yen to boost the economy.
Against the yen, the euro was last up 0.3 percent at 119.32 yen, having earlier hit 120.12 yen, its highest since May 2011. This came on top of a rise of more than 3 percent last week.
"Given the correlation between the euro and equity markets, the euro should trade higher, toward $1.35 or $1.36, though levels between $1.35 and $1.40 start to look expensive and that is not what the euro zone needs right now," said Richard Falkenhall, currency strategist at SEB.
Improvements in euro sentiment since the ECB announced a plan last year to buy the bonds of indebted countries was contributing to the trend of yen weakness, Falkenhall said, as the yen had previously gained on the back of euro zone worries.
YEN, SWISS FRANC FALL
The dollar was last trading at 89.32 yen, up 0.2 percent on the day. The greenback earlier hit 89.67 yen, its highest since June 2010, after breaching an options barrier at 89.50 yen. Traders said, however, it could struggle ahead of another reported options barrier at 90.00 yen.
Japan last week approved a $117 billion stimulus package, the biggest spending boost since the financial crisis, in an effort to support the economy.
Along with the yen, the Swiss franc - both currencies are sought during financial market stress - came under pressure as sentiment toward higher-risk assets improved.
"Risk appetite is improving and that means there is less demand for safe-haven currencies like the Swiss franc," said Credit Suisse's Hettinger. "We expect euro/Swiss franc to rise to 1.24 in 12 months, but that target could overshoot easily."
The euro last traded at 1.2258 francs, up 0.6 percent on the day, according to Reuters data.
Later on Monday, investors will turn their focus to a speech by U.S. Federal Reserve Chairman Ben Bernanke for any hints on how long the Fed's asset-buying program will last.