* Euro hits 7-month high vs yen, more than 5-week high vs dollar * U.S. fiscal talks dominate traders attention * Expectations of BoJ easing add to selling pressure on yen By Wanfeng Zhou NEW YORK, Nov 30 (Reuters) - The euro rose to its highest in more than five weeks against the dollar on Friday, posting its fourth straight month of gains as investors clung to hopes that U.S. politicians would reach a fiscal deal before the end of the year. The yen slumped and registered its worst month since February against the dollar on speculation that a likely change in Japan's government would lead to aggressive monetary easing. Speculators boosted their bets against the yen to the highest since May, 2007. For the past few weeks, financial markets have traded on headlines from U.S. political leaders on the "fiscal cliff," tax hikes and spending cuts worth $600 billion set to kick in early next year that could hurt the economy. U.S. House of Representatives Speaker John Boehner said Republicans and President Barack Obama are locked in a stalemate. Obama blamed Republicans who control the House for holding up a deal. "The market is sort of anticipating that some kind of a compromise will be reached before December 31. That's the mindset of the market right now," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. The euro rose 0.2 percent to $1.3001, having earlier touched $1.3027 on Reuters data, its strongest level since Oct. 23. Traders reported offers at $1.3040-50. For the month, the euro rose 0.3 percent against the dollar. German lawmakers on Friday approved the latest Greek bailout by a large majority, also helping euro sentiment. But the outcome was widely expected. Gains in Europe's shared currency came despite weak data that included a sharp drop in German retail sales, a fall in French consumer spending and record-high unemployment for the euro zone. The gloomy economic outlook for the euro zone should limit further strength in the euro, analysts said. "With unemployment still sitting at 11 percent in the euro zone and inflation at just 2 percent, I can't see how the euro can move up from here, other than people looking at an alternative to the dollar," said Chris Gaffney, co-chief investment officer at Everbank Wealth Management in St. Louis. The euro dipped to session lows against the dollar after weak U.S. personal income and spending data. The data dented the market's risk appetite as investors sought the dollar for its safety appeal. "The disappointing data has dampened the modest enthusiasm that major economies are gaining strength," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "The report also reinforces the fact that U.S. growth in Q4 would be weak." The dollar rose 0.5 percent to 82.51 yen, close to a near eight-month high of 82.82 yen hit last week. It was on pace for a gain of 3.4 percent in November, the biggest since February. The euro rose 0.6 percent to 107.19 yen. Earlier it climbed to 107.66, its highest since late April. Traders cited month-end demand for the euro from Japanese importers. In November, the euro rallied 3.7 percent, the best month since June against the yen. Although Japan's main opposition leader, Shinzo Abe, a front-runner to become the new prime minister, seemed to have softened his aggressive stance on Bank of Japan independence, he did reiterate his desire for the bank to buy foreign bonds. "The market is gearing up toward the December 16 election," said Eliasson. He said with growing expectations of further easing, the dollar could rise further, to 85 to 87 yen, if the election goes as expected. The dollar index ended the month of November up 0.3 percent after three straight months of losses.