* Euro lifted by better-than-forecast euro zone PMI
* Slight pullback on ECB loan repayments announcement
* Focus on U.S. payrolls data at 1330 GMT
By Nia Williams
LONDON, Feb 1 The euro hit a 33-month high against the yen and a 14-month peak against the dollar on Friday, lifted by improving euro zone manufacturing data and bets of a firm U.S. jobs number.
News that banks will repay less than expected in European Central Bank three-year loans next week dented some demand for the euro, but losses were limited by optimism the worst of the region's debt crisis is over.
A Purchasing Managers' Index (PMI) survey showed euro zone factories had their most resilient month in nearly a year during January, helped by solid German output.
The euro rose more than 1 percent to hit 126.17 yen, its highest since April 2010, before pulling back to last trade at 125.74 yen.
Against the dollar, the euro broke above an options barrier at $1.3650 to hit $1.3675, its strongest since November 2011. It pared gains after the ECB announcement to trade at $1.3650, up 0.5 percent on the day.
"The PMIs this morning continued to maintain a pretty strong bid for the euro. It seems the path of least resistance is towards the euro going higher," said Jeremy Stretch, head of currency strategy at CIBC World Markets, adding the next target for the euro is the psychologically important level of $1.37.
"We saw a little pullback (after the ECB announcement) but it still seems markets are biased towards trying to test the topside."
Banks will pay back another 3.5 billion euros of emergency loans from the ECB next week, further deflating the central bank's balance sheet at a time when the U.S. Federal Reserve and Bank of Japan are pumping cash into their economies.
Although next week's repayment total is less than the market had expected, prompting some investors to sell the euro, the tightening monetary conditions were overall seen as positive for the shared currency.
The yen remained under heavy selling pressure on expectations of aggressive easing in Japan, with the dollar up 0.4 percent at 92.09 yen, having earlier hit 92.29 yen on trading platform EBS, its highest since June 2010.
Traders said the yen's drop accelerated as market players in Asia targeted and breached option barriers at 92.00 yen against the dollar and 125.00 yen versus the euro.
Selling the yen has become a one-way bet with Japanese Prime Minister Shinzo Abe heaping relentless pressure on the Bank of Japan to ease monetary policy aggressively to jolt the economy out of a decade-long malaise.
U.S. JOBS DATA
The next focus for investors is U.S. jobs data at 1330 GMT. Traders said some investors were betting on a strong reading, which could knock the safe-haven dollar against riskier, growth-linked currencies, including the euro but boost it further against the yen.
Reuters polling shows expectations centre on non-farm payrolls adding 160,000 jobs and the jobless rate staying at 7.8 percent.
The U.S. ISM factory survey, a national report on the state of American manufacturers, is also due at 1500 GMT.
John Hardy, currency strategist at Saxo Bank, said currencies had already moved so much that a reading in line with expectations could disappoint the market.
"Now the bar has been raised by these moves and we will need to see a significant upside surprise to push it further. If the data is in-line to softer and if ISM data doesn't impress, then we could see a consolidation," he said.
The Australian dollar hit a one-month low of $1.0364 after Chinese PMI data for January came in slightly below expectations while the Australian PMI was also weak.
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