* USDJPY rises to highest level since July 2011
* Importers buying dollars, stops triggered above 80.41 yen
* Euro hits 2-1/2 mth high vs dlr on short covering rally
By Nia Williams
LONDON, Feb 24 (Reuters) - The yen hit multi-month lows against the dollar and euro on Friday, hurt by reported selling by Japanese importers, although market players warned that rock-bottom U.S. government bond yields may slow the pace of any more losses versus the dollar.
The euro extended a surge to 10-week highs against the dollar in the wake of better-than-expected German data on Thursday which led investors to close some bets on losses for the single currency.
So far this month the dollar has rallied around 5 percent against the yen, helped by monetary easing from the Bank of Japan as well as Japan’s shrinking current account surplus, exacerbated by rising crude oil prices.
The greenback rose to a session high of 80.71 yen, pulling further away from the 2012 low of 76.03 hit on Feb. 1. It was last up 0.8 percent on the day at 80.56 yen.
Short-term players triggered weak stop-loss orders above Wednesday’s peak of 80.41, helping the dollar break above a major chart resistance point of 80.42 yen, which is the 50 percent retracement of its fall from the 2011 high around 85.50 yen to the all-time low of 75.31 yen.
Some analysts said the rapid pace of gains was likely to slow given U.S. Treasury yields, which traditionally have a strong correlation with moves in dollar/yen, are still fairly low. Those yields are seen remaining capped due to the Federal Reserve’s pledge to keep rates exceptionally low until at least 2014.
“Traders are talking about a move to 82 yen, but the interesting thing will be to see what happens after that. U.S. yields have not really justified the move,” said Geoff Kendrick, FX analyst at Nomura.
“But as long as we do not get any weak U.S. data, and we do not have anything until ISM next week, dollar/yen can keep grinding higher.”
The euro rose 1 percent against the yen to a fresh 3-1/2 month high of 107.98, more than 10 yen off this year’s low of 97.04 yen hit on Jan. 16.
Meanwhile, the dollar hit a near 3-1/2 month trough against the Swiss franc of 0.8990 francs, with the franc being seen as an alternative safe haven to the yen after the Bank of Japan’s easing measures.
Against the dollar the euro extended hefty gains made a day earlier after an improved German Ifo business sentiment survey triggered a short-covering rally, where players give up on bets that the currency will weaken.
Market players said the euro rally had good momentum after it broke through the 100-day moving average around $1.3306 on Thursday, and took out a reported option barrier at $1.34 in early European trade on Friday.
The euro was last up 0.2 percent on the day at $1.3399, just off a session high of $1.3405.
Although the Ifo data raised hopes growth in the euro zone’s largest economy was picking up, the European Commission warned the region could be heading for recession as the debt crisis dragged on, clouding the euro’s longer-term.
Some analysts said the euro’s resilience was due to better risk appetite ahead of the European Central Bank’s second long-term, low-rate refinancing operation next week.
Banks are expected to borrow around half a trillion euros and while the funds were likely to boost the euro in the short-term, the extra liquidity could store up problems in future.
“The huge mass of liquidity pumped into the market is some kind of relief in the short-term, if you have enough liquidity equities will always be happy,” said Lutz Karpowitz, currency analyst at Commerzbank.
“But we are definitely going to face inflationary pressures in the future.”
The Australian dollar rose 0.3 percent to $1.0737, after the Reserve Bank of Australia governor said monetary policy was broadly neutral, stoking speculation the central bank may hold off from cutting interest rates in the near-term.