* Investors keeping eye on developments from G20 in Sydney
* Euro zone data knocks euro away from 7-week high vs dollar
By Lisa Twaronite
TOKYO, Feb 21 The dollar pulled away from a seven-week low against the euro and pushed higher against the yen in early Asian trade on Friday, bolstered by upbeat U.S. economic data.
The number of Americans filing new claims for unemployment benefits fell last week, suggesting the labour market continues to improve steadily despite recent severe cold weather.
Financial data firm Markit said U.S. manufacturing activity picked up pace to its fastest growth in nearly four years, although a separate manufacturing survey showed activity in the mid-Atlantic region fell to the lowest in a year.
Investors awaited existing home sales data due later on Friday, as well as consumer confidence figures set to be released on Tuesday, for more evidence backing the U.S. Federal Reserve's stance that it will continue to wind down its asset-buying stimulus as the economy improves overall.
"While dollar/yen is struggling to rally, if investors continue to discount weaker U.S. data, the currency pair could crack above 103 on the first sign of strength," BK Asset Management managing director Kathy Lien said in a note to clients.
In the meantime, she said, currency traders should keep an eye on Treasuries and equities.
"If yields continue to rise and stocks extend higher, dollar/yen could hit its monthly high," she said.
The dollar added about 0.1 percent to 102.33 yen, moving further away from the previous session's low of 101.65 yen and back towards a two-week high of 102.73 yen hit on Tuesday.
The yield on benchmark 10-year Treasury notes was at 2.755 percent on Friday, compared with Thursday's U.S. close of 2.754 percent.
Market participants are also watching for developments from this weekend's Group of 20 meeting of finance ministers and central bank chiefs in Sydney, at which global growth and recent turmoil in emerging markets are expected to be in focus.
The G20 needs to discuss the impact of the Fed's stimulus withdrawal on emerging markets, a top Russian central banker said on Friday.
The euro fell as low as $1.3685 on Thursday, moving further away from Wednesday's high of $1.3773, which was its highest since Jan. 2. It was last buying $1.3716, slightly down on the day.
The euro steadied against its Japanese counterpart at 140.37 yen, but remained shy of a three-week peak of 141.02 yen hit on Tuesday.
Gloomy euro zone business surveys also cast a shadow over the single currency. Markit's Composite Purchasing Managers' Index for the euro zone dipped to 52.7 from January's 31-month high of 52.9, missing forecasts for a rise to 53.1.
A much softer-than-expected reading of French inflation heightened concerns about the risks of deflation in the euro zone, while French manufacturing data fell short of forecasts.