* Euro hits 7-mth high vs yen, near 4-wk high vs dollar
* Markets hopeful of an aid deal for Greece
* Resumption of U.S. fiscal cliff talks also eyed
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, Nov 26 (Reuters) - The euro hit a seven-month high against the yen and held near a one-month peak versus the dollar on Monday, supported by hopes that Greece will finally secure more emergency loans to keep it afloat.
Euro zone finance ministers meet on Monday for a third time in as many weeks to hammer out a deal to get international lenders to release aid to Greece in time for debt repayments due mid-December.
Germany Chancellor Angela Merkel said she was confident a deal could be reached, while the French finance minister said an agreement was close.
The euro rose to as high as 107.135 yen on trading platform EBS, the single currency’s strongest level since late April. It later trimmed its gains and last changed hands at 106.70 yen.
Against the dollar, the euro eased 0.2 percent to $1.2954 , having hit a high of $1.2991 on Friday, the euro’s highest level since late October.
“There is optimism around in regards to the euro area’s ability to achieve a deal on Greece,” said Emma Lawson, senior currency strategist at the National Australia Bank, adding further upside in euro/dollar was likely.
Some analysts, however, cautioned that the euro could lose momentum even if international lenders agree on Monday to release the next tranche of aid to Greece.
“It could be a case of buy-on-rumour, sell-on-fact. The euro has strong resistance just above $1.30,” said Mitul Kotecha, global head of foreign exchange strategy for Credit Agricole in Hong Kong.
The euro’s intraday highs struck on Oct. 25 and Oct. 31, at levels slightly above $1.3020, should act as resistance, he said, adding: “I think upside momentum will fade.”
With the euro on the front foot, the dollar index languished near a three-week trough of 80.128 plumbed on Friday and last stood at 80.295.
There was limited reaction to news that separatists in Spain’s Catalonia won regional elections on Sunday but failed to get the resounding mandate they need to push convincingly for a referendum on independence.
“It could have a been a worse outcome for the euro, so that’s probably provided a bit more relief as well,” said Credit Agricole’s Kotecha.
Investors continued to make short shrift of the yen on expectations of bolder stimulus to spur Japan’s economy. The country’s opposition party, tipped to win next month’s election, has called for radical monetary stimulus to beat deflation.
The dollar bought 82.36 yen, down 0.1 percent from late U.S. trade on Friday but still within sight of a 7-1/2-month high of 82.84 yen set last Thursday. That was the dollar’s highest level against the yen since early April.
Dealers warned much of last week’s action occurred in thin trading conditions due to holidays in the United States and Japan and could easily be unwound.
Still, analysts at BNP Paribas believed the market’s ‘risk-on’ mode could continue if a Greek aid deal was indeed finalised and the United States made progress on its own fiscal problem.
“Although a swift deal is probably too optimistic, we believe an eventual compromise will be achieved well before the end of the year,” they said of the U.S. fiscal cliff talks, adding they expected the Federal Reserve to expand its quantitative easing programme at its December meeting as well.
“(This) combination of positive developments should, in our view, maintain this risk momentum over the coming weeks.”
The White House and Congress are also set to resume negotiations this week to avoid a series of automatic tax hikes and spending cuts worth $600 billion set for January, which analysts fear could tip the world’s biggest economy into recession.