* Dollar falls versus yen, rises against euro, riskier FX
* Euro hurt by weak data, NZ dollar falls to 9-month low
* Month-end flows dominate, busy week for events ahead
By Jessica Mortimer
LONDON, May 31 (Reuters) - The dollar fell to a three-week low against the yen on Friday, but month-end flows, weak euro zone data and lower equity markets lifted it against the euro and riskier growth-linked currencies.
The yen was helped after data showed a better Japanese factory output and ebbing deflation. It also tends to rise during financial market uncertainty and falls in equities. European shares were down 0.6 percent.
The dollar fell 0.3 percent to 100.30 yen, its lowest since May 9. Traders said it extended falls after stop-loss sell orders were triggered on the break below Thursday’s low of 100.46, though strong support was expected at 100 yen.
“I’m generally in favour of a correction in dollar/yen and the 97/97.50 level will be an area of focus if the 100 level breaks,” said John Hardy, currency analyst at Saxo.
Analysts said the better Japanese data sparked talk that monetary easing in Japan may not need to be as aggressive as previously thought. The dollar has also succumbed to profit-taking since it rallied to a 4-1/2 year peak of 103.74 yen earlier this month.
But they expected the broad trend for dollar strength on the prospect of the Federal Reserve scaling back stimulus and yen weakness due to Japan’s hefty monetary easing to continue.
“I’m optimistic that the dollar will still go up against the yen and the euro ... The market wants to take out 100 (yen) and probably will do, then it will recover,” said Steve Barrow, head of G10 currency research at Standard Bank.
But he added that uncertainty over how month-end flows would impact the market could leave traders inclined to stay sidelined, especially with key U.S. manufacturing activity and jobs data as well as a euro zone policy decision due next week.
The euro was down 0.4 percent at $1.2997, off Thursday’s three-week high of $1.3062 and hurt by data showing record high unemployment and low inflation.
This raised concerns European Central Bank policymakers may ease monetary policy further, although a Reuters poll showed most economists think the ECB will stay on hold.
The dollar index, which measures its value against a basket of six major currencies, was up 0.2 percent at 83.231 and was poised to end up 1.8 percent on the month.
Commodity-linked currencies fell sharply, with the New Zealand dollar hitting a nine-month low of $0.7973 and the Australian dollar down 0.6 percent.