* Euro hits strongest since Feb 2012 vs dollar
* Euro continues to rise after ECB meeting last week
* Euro rises to 13-month high versus Swiss franc
* Yen hits 2-1/2 year low versus dollar, 20-mth low versus euro
By Anirban Nag
LONDON, Jan 14 The euro hit an 11-month high against the dollar on Monday and extended gains versus the yen as Japan put more pressure on its central bank to ease monetary policy while chances of a euro zone rate cut faded.
An upbeat tone from the European Central Bank last week and waning worries about peripheral euro zone debt left room for further gains in the euro, traders and analysts said. It rose to a 13-month high against the safe-haven Swiss franc, while it traded firm near a 20-month peak against the yen.
The euro was up 0.2 percent against the dollar at $1.3365, having earlier risen as high as $1.3404, its strongest since late February 2012, on buying by macro funds, traders said. Chartists said the euro's firm break above resistance at $1.33, a level it failed to breach in mid-December and again in early January, meant more gains were in store.
"We are seeing a positive environment for the euro and expect it to hit $1.35 in the three months," said Marcus Hettinger, global FX strategist at Credit Suisse, Zurich.
The euro's gains have accelerated after ECB President Mario Draghi last Thursday suggested an interest rate cut was off the agenda for now and pointed to signs of improvement in the euro zone economy and in financial markets.
That was in sharp contrast to Japan where Prime Minister Shinzo Abe said on Sunday the central bank must set 2 percent inflation target as a medium-, not long-term, objective. This meant the central bank would have to print more yen to boost the economy, a factor that pushed the yen to a fresh 2-1/2 year low against the dollar.
Against the yen, the euro was up 0.3 percent at 119.30 yen , having earlier hit 120.13 yen, its highest since May 2011. This came on top of a rise of more than 3 percent last week and came despite output at euro zone factories falling for the third straight month in November.
"Given the correlation between the euro and equity markets, the euro should trade higher, towards $1.35 or $1.36, though levels between $1.35 and $1.40 start to look expensive and that's not what the euro zone needs right now," said Richard Falkenhall, currency strategist at SEB.
Falkenhall said improvements in euro sentiment since the ECB announced a plan last year to buy the bonds of indebted countries was contributing to the trend of yen weakness, as previously the yen had gained on the back of euro zone worries.
YEN AND SWISS FRANC WEAKEN
The dollar was up 0.2 percent at 89.30 yen, having breached an options barrier at 89.50 yen to hit 89.67 yen, its highest since June 2010. But it could struggle ahead of another reported options barrier at 90.00 yen, traders said.
"The confirmation that there's going to be a push for a new (BOJ) governor, that new governor is going to have a mandate of 2 percent inflation, that plus the fiscal stimulus is a major negative for the yen," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.
Japan last week approved a $117 billion stimulus package, the biggest spending boost since the financial crisis, to try to support the economy.
Along with the yen, the Swiss franc - both currencies are sought during financial market stress - came under pressure as sentiment towards riskier assets improved. Stock markets worldwide have rallied in the New Year with the MSCI world index trading near an 18-month high.
The euro rose to a 13-month high against the Swiss franc , rising past reported option barriers at 1.2250 francs, to hit 1.22770 francs on trading platform EBS. Traders reported growing demand for topside option strikes in the euro/Swiss franc pair, reflecting more chances of a rise in the euro.
"Risk appetite is improving and that means there is less demand for safe-haven currencies like the Swiss franc," said Credit Suisse's Hettinger. "We expect euro/Swiss franc to rise to 1.24 in 12 months, but that target could overshoot easily."
Later on Monday, investors will turn their focus to a speech by U.S. Federal Reserve Chairman Ben Bernanke for any hints on how long the Fed's asset-buying programme will last.