* Concerns about Cyprus deal, Italian politics weigh on euro * Aussie slides after China PMI disappoints * Thin trade allows yen to firm despite BOJ easing expectations * BoJ tankan: improvement in sentiment weaker than forecast By Gertrude Chavez-Dreyfuss NEW YORK, April 1 The yen firmed across the board on Monday on safe-haven flows following weaker-than-expected Chinese factory activity and renewed uncertainty in the Korean peninsula. The euro, meanwhile, was flat after approaching a four-month low earlier on concerns about the spillover from Cyprus' bailout terms. Trading, however, was thin, with many markets still closed for Easter holidays. But the mood was cautious ahead of the European Central Bank's monetary policy review on Thursday and the monthly U.S. payroll data out on Friday. "We're seeing safe-haven flows from the Australian and New Zealand dollars into the yen because of the weak Chinese data," said Ravi Bharadwaj, market analyst at Western Union Business Solutions in Washington. China's official Purchasing Managers' Index (PMI) reached 50.9 in March, stopping short of market expectations of a jump to 52 from February's 50.1. The dollar fell 0.6 percent to 93.65 yen, with the euro also sliding 0.6 percent to 120.02 yen. The Australian dollar also slipped 0.1 percent to US$1.0409 while the New Zealand dollar was down 0.2 percent at US$0.8358. Tensions in North Korea also supported the yen, analysts said. South Korea on Monday said it will strike back quickly if the North stages any attack on its territory amid shrill rhetoric from Pyongyang and the U.S. deployment of radar-evading fighter planes. Earlier, North Korea said the region is on the brink of a nuclear war in the wake of United Nations sanctions imposed for its February nuclear test and a series of joint U.S. and South Korean military drills that have included a rare U.S. show of aerial power. "The vitriolic statements from North Korea have upped the uncertainty in the region and we're seeing the yen benefit as a result," said Western Union's Bharadwaj. Investors had earlier brushed off a disappointingly narrow improvement in Japanese business sentiment over the last quarter shown by the Bank of Japan's tankan survey, as the focus is more on the central bank's policy review later in the week. The BoJ is widely expected to scale up its bond buying and to extend the maturities of the bonds it purchases under new Governor Haruhiko Kuroda. Bets on a radical shift in the BoJ's policy has ramped the dollar up 20.9 percent against the yen in the last two quarters, pushing it to a 3-1/2 year high of 96.71 yen last month. The euro, meanwhile, was little changed at $1.2815, hitting a low of $1.2770, which was just above a four-month trough of $1.2750 hit last Wednesday. Europe's common currency has slid steadily since February, when it hit a 14-month high of $1.3711. At the weekend, the Cypriot central bank confirmed that major depositors in Cyprus's biggest bank would lose around 60 percent of savings over 100,000 euros, well above the initially touted cut of 30 to 40 percent. The euro has major support around $1.2680, a 61.8 percent retracement of its July-February rally. But a break there could open the way for a test of last year's low near $1.20. Borrowing costs in Slovenia, seen by economists as one of the next potential candidates for the next euro zone bailout, jumped over 100 basis points in the wake of the Cyprus bailout, while Italian borrowing costs reached their highest since November at a 5-year bond auction last week. Appetite for Italian debt has been hurt by the deadlock in the country's politics since inconclusive elections a month ago, reinforcing the common currency's weakness. At the weekend, President Giorgio Napolitano summoned 10 "wise men", including European Affairs Minister Enzo Moavero and senior politicians, to propose a series of urgent measures that could be backed by all parties. However, the move offered little hope of overcoming the deep political divisions.