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* New Zealand dollar highest since August 2011
* Trade surplus, c.bank comments drive kiwi higher
* Yen retreats after touching 1-week high vs dollar
* Euro steady after ECB-spurred dip (Updates prices)
By Patrick Graham
LONDON, March 27 (Reuters) - The New Zealand dollar surged to its highest level since mid-2011 on Thursday, helped by a sharp rise in its trade surplus and comments from one policymaker on how to remove limits aimed at cooling house prices and raise interest rates instead.
The euro, whose slide has been the main focus of this week's trade in major currencies, steadied, with dealers unwilling as yet to believe that the European Central Bank will follow through on hints of more monetary policy easing.
Traders said the day could see substantial flows linked to the end of the financial year in Japan on Monday and the end of the month for dealers elsewhere, potentially strengthening volatility.
The kiwi gained a full percentage point compared to prices at the end of the U.S. day, rising to a 2-1/2 year high of $0.8675.
"The trade surplus is supportive, but we have also had comments from the RBNZ's Spencer, discussing under what conditions they might decide to remove the macroprudential measures on housing," said Ian Stannard, a strategist with Morgan Stanley in London.
"That may let inflation rise and also suggests that they might tighten policy as well."
The trade surplus was the highest ever for February and the biggest since April 2011, helped by a rise in dairy exports to China. Spencer said the limits on low deposit high risk home loans were worth up to 50 basis points in interest rate rises by the bank, which began to raise rates from record lows earlier this month.
Bundesbank chief Jens Weidmann sent a shockwave through currency markets on Tuesday, appearing to tone down the German central bank's long held resistance to emergency measures to further ease monetary conditions in the euro zone.
The euro, still supported by a mix of its strong overall current account surplus and signs of portfolio investment flowing back into Europe's troubled lower half, has steadied since.
Traders believe there is support for the single currency from a major central bank around a low of $1.3749 that has been tested twice in recent days. A break of that would bring the currency to its lowest level since March 6. It traded at $1.3760 in early European trade.
"I still like the euro a bit higher from here," said Stannard. "But while I wouldn't say it was a line in the sand it is clear that as we approach $1.40 the sensitivity of the ECB to the euro's rise increases."
Weidmann said that negative interest rates were an option and quantitative easing was not out of the question while ECB chief Mario Draghi reemphasised the bank was ready to act if inflation came in lower than it expected.
That puts fresh focus on euro zone consumer price data due on Monday, which economists expect to show subdued inflation of 0.7 percent, below the ECB's annual inflation forecast of 1 percent this year.
"It seems the ECB is concerned about disinflation a bit more than the market had been led to believe. The ECB seems to be trying to adjust market expectations as the euro has gained," said Shin Kadota, chief FX strategist at Barclays.
Against the yen, the single currency touched a three-week low of 140.28 yen on trading platform EBS, falling back to levels seen before this month's ECB policy meeting. It last stood at around 140.33 yen, down 0.2 percent on the day.
The yen also touched a one-week high of 101.71 yen against the dollar, drawing some support from renewed concerns over Ukraine after U.S. President Barack Obama's tough talk on Russia on Wednesday. There were also some soft spots in U.S. durable goods orders data.
In early European trade, the dollar was flat at 102.02 yen. (Additional reporting by Masayuki Kitano and Hideyuki Sano; Editing by Toby Chopra)