* Weidmann downplays intervention talk to weaken euro
* Concerns about Cyprus, Spain, Italy limit euro gains
* Investors await BOJ, euro zone GDP and G20 meetings
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 11 (Reuters) - The euro rallied from nearly three-week lows against the dollar on Monday after a European Central Bank policymaker said Europe’s shared currency was not overvalued at current levels.
Discussions about an overvaluation of the euro are simply a diversion from governments’ task of sorting out their economies, Jens Weidmann said, resisting political pressure to weaken the currency.
He added that a currency policy aimed at weakening the euro would lead to higher inflation.
The euro, which fell against the greenback during the previous three sessions and was down 1.2 percent so far this month, was buoyed by investors seeking to buy at lower levels, but gains accelerated after Weidmann’s comments.
“Given the fragility of the markets lately, that was all it took to bring the single currency above $1.3400 and test the $1.3430 resistance area,” said Matthew Lifson, senior analyst and trader at Cambridge Mercantile Group in Princeton, New Jersey.
The single currency could turn lower if a Eurogroup of euro zone finance ministers meeting on Monday and a G20 meeting later in the week exacerbate tensions over whether some countries are deliberately trying to weaken their currencies to boost exports.
The euro last traded up 0.4 percent at $1.3414 after hitting a session high of $1.3427.
Intraday bias remains mildly on the downside, said analysts at ActionForex.com. The pullback from this year’s high of $1.3711 could extend to the 55-day exponential moving average at around $1.3247 and possibly below.
But the firm expects strong support at around $1.3075 -- the 38.2 percent retracement of that whole rise from the $1.2040 low hit in July last year to the 2012 peak of $1.3711. Current rise from 1.2040 is still expected to continue and if the euro hits above $1.3458, that will turn bias back to the upside for retesting of $1.3711 first.
“The euro is in a consolidation mode right now, but the Eurogroup meeting should set the temperature for the rest of the week,” said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in New York.
The Group of Seven nations are considering issuing a statement this week reaffirming their commitment to “market-determined” exchange rates in response to heating rhetoric about a currency war, two G20 officials said on Monday.
France insisted on Monday that euro zone finance officials should discuss the rising strength of the euro, but several ministers played down the issue and the G7 was expected to call for “market-determined” exchange rates.
Dutch Finance Minister Jeroen Dijsselbloemon on Monday said Eurogroup ministers discussed the euro, but concluded that the debate belonged more with the G20 meeting later this week in Moscow.
Some remain uneasy about the euro due to political and fiscal uncertainty as well as last month’s steep ascent.
Concerns about the terms of a bailout for Cyprus, which will be high on the Eurogroup’s agenda, could cap the euro’s gains, analysts said.
There are also growing worries about a political scandal in Spain, and about Italy in the run-up to the Feb. 24-25 election.
Against the yen, the euro rose 1.2 percent to 125.37 yen after hitting a session peak of 125.44. That is above Friday’s one-week low of 123.43, but still some way off the 34-month high of 127.71 yen hit on Feb. 6.
The euro sold off last week after European Central Bank President Mario Draghi kept alive expectations of rate cuts and said the bank would monitor the economic impact of the strengthening currency.
Much of Asia was shut for the Lunar New Year holidays keeping volumes on the low side. Traders braced for more volatility later in the week with U.S. retail sales, European growth data, the G20 meeting in Moscow, and a Bank of Japan policy decision.
The BoJ, meanwhile, is expected to keep monetary policy steady this week. In the past few months, the yen has slumped as Prime Minister Shinzo Abe put pressure on the central bank to take aggressive easing measures to revive the economy.
The dollar last traded up 0.8 percent at 93.47 yen , but below a 33-month high of 94.06 yen hit Wednesday, according to Reuters data.