* Yen falls after major earthquake in Japan
* Euro edges up, focus on Friday's EU summit
* Short-term bias remains positive for the euro
* Aussie recovers after steep losses
By Gertrude Chavez-Dreyfuss
TOKYO, March 11 (Reuters) - The yen fell broadly and slumped to a two-week low against the dollar on Friday after a major earthquake struck Japan and triggered a slide in Japanese shares.
The dollar climbed to as high as around 83.29 yen, the dollar's highest since Feb. 22, rising from around 82.80 yen on news of the quake, which the U.S. Geological Survey said was measured at magnitude 8.9.
Tokyo shares extended their losses, and JGB futures surged after the earthquake.
The dollar last stood at 83.15 yen up 0.2 percent from late U.S. trade on Thursday. The euro climbed 0.4 percent against the yen to 114.84 yen .
The euro rose 0.1 percent against the dollar to $1.3815 , stabilising after steep falls in the previous session but it remained vulnerable to a sell-off if a euro zone summit later in the day fails to ease concerns about sovereign debt.
For now, the single currency remains on an upward bias in the short term on the technical charts. But it needs to stay above $1.3777, a touch higher than Thursday's low in order to maintain its bullish momentum.
A daily close below $1.3777 would probably push the euro to $1.3591, a 38.2 percent Fibonacci retracement of the January to early March rally, analysts said.
Some analysts said a "buy-on-dips" strategy makes sense for the euro as the prospect of a series of rate hikes by the European Central Bank should underpin the currency this year.
"Any disappointment with the policy response to the sovereign debt crisis should challenge the euro near term, especially as investors remain overly optimistic about the prospects of a resolution," said Gabriel De Kock, currency strategist at Morgan Stanley in New York.
"However, we expect broad-based gains after ECB rate hikes get under way, most likely in April."
Euro zone leaders meet on Friday, ahead of a full 27-nation European Union summit on March 24-25, to tackle the region's debt crisis. There was some nervousness before Friday's meeting, but that has since dissipated as investors are not expecting any major announcement that could appease worries about the debt crisis.
Moody's also turned up the heat on Europe this week, slashing Greece's credit rating by three notches and Spain by one and threatening more downgrades. That has weighed on the euro since hitting four-month highs last Monday.
"These gains in the euro are all about positioning," said Yuki Sakasai, currency strategist at Barclays Capital in Tokyo. "People are cutting their positions on the euro ahead of the EU summit later today. There was a lot of nervousness ahead of that meeting, but things have calmed down a bit because we're not expecting any concrete solution from that meeting."
Implied volatility on the euro versus the dollar edged higher across the curve in line with the single currency's fall in the spot market on Thursday. One-month implied volatility on euro/dollar, for instance, hit as high as 10.35 percent from Thursday's peak of 10.25 .
Traders are expecting sharp moves over the next 30 days with the European Union heads of state summit on March 24-25 and a possible rate hike by the European Central Bank in early April.
Sentiment on the euro has also deteriorated a bit in the options market, with one-month 25 delta risk reversals showing a bias for puts at -1.700 vols on Friday. Earlier in the week, one-month euro/dollar puts were at -1.125 vols, higher than current levels and in line with the euro hitting four month peaks above $1.4035.
Currency bid prices at 1:09 a.m. EST (0609 GMT). All data taken from Reuters calculated from the levels at 4:30 p.m.(2130 GMT) in the previous New York session.
Last US Close Pct YTD Pct 2010
March 10 Change Change Close ------------------------------------------------------------- Euro/dlr 1.3821 1.3792 +0.21 +3.32 1.3377 Dlr/yen 83.000 82.880 +0.14 +2.28 81.150 Euro/yen 114.74 114.34 +0.35 +5.62 108.63 Dlr/swiss 0.9321 0.9320 +0.01 -0.15 0.9335 Stg/dlr 1.6062 1.6053 +0.06 +2.97 1.5599 Dlr/cad 0.9749 0.9751 -0.02 -2.19 0.9967 Aus/dlr 1.0013 1.0004 +0.09 -1.86 1.0203 Euro/swiss 1.2884 1.2855 +0.23 +3.17 1.2488 Euro/stg 0.8602 0.8590 +0.14 +0.35 0.8572 Nzd/dlr 0.7346 0.7346 0.00 -5.71 0.7791 Dlr/Norw 5.6373 5.6560 -0.33 -3.17 5.8218 Euro/Norw 7.7980 7.8028 -0.06 +0.11 7.7895 Dlr/Swed 6.3719 6.3952 -0.36 -5.04 6.7098 Euro/Swed 8.8102 8.8270 -0.19 -1.90 8.9809 All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ World central bank news Economic Forecasts... Official rates... Forex Diary....... Top events........ Diaries........... Diaries Index........ Press Digests..... Polls on G7 economies.. European markets......
(Additional reporting by Ian Chua in Sydney)