* Euro hits 11-mth high above 120 yen
* Dudley's dovish comments take shine off dollar
* Aussie rises to fresh 29-year high at $1.0422
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, April 4 (Reuters) - The euro hit fresh 11-month highs against a broadly weaker yen on Monday and touched a five-month peak against the dollar with markets all but certain the European Central Bank will raise interest rates later this week.
In contrast, the Bank of Japan is likely to downgrade its economic assessment at its meeting on Wednesday and may consider finding more ways to help the economy recover from last month's massive earthquake and devastating tsunami.
This is likely to weigh on the Japanese currency, which is already under pressure following a rare coordinated G7 intervention to temper runaway yen gains on March 18.
The euro briefly popped above 120 yen for the first time since May 2010 and last traded at 119.65 yen, up 0.1 percent from late U.S. trade on Friday.
"Coming into the ECB meeting this week, we have to anticipate further euro gains," said Todd Elmer, currency strategist at Citi in Singapore.
The single currency hit a five-month high against the dollar of $1.4269 on trading platform EBS earlier on Monday, having gained a lift from some stop-loss buying, traders said, adding that more stops were seen towards $1.4300.
The euro later trimmed its gains to stand at $1.4225 , down 0.1 percent from late U.S. trade on Friday.
The euro's earlier rise brought it close to resistance at its November peak of $1.4283, a level that also roughly coincides with trendline resistance drawn from the euro's record high struck in July 2008.
A clear breach of that resistance could open the way for the euro to climb further, with one possible target seen at $1.4374, the 76.4 percent retracement of the euro's slide between November 2009 to June 2010.
"I don't think investors are overly long at this stage. You could see some people forced to chase the move. That has the potential to fuel further gains," said Elmer at Citi in Singapore.
YEN DIPS DOLLAR, EURO
The dollar edged up 0.1 percent to 84.11 yen . It had hit a six-month high of 84.735 yen on Friday on trading platform EBS, up 11 percent from its post-World War Two record low of 76.25 yen struck in March.
The dollar rose above its 200-day moving average against the yen last week, in a sign that its downtrend against the yen may be drawing to a close, and one potential upside target lies at its mid-September high of 85.94 yen.
"However, we think the further rise of USD will be limited or even reversed as recent market expectation over the early end of U.S. QE2 and the start of rate hiking within this year looks overdone," analysts at Barclays Capital wrote in a report.
Indeed, one of the Federal Reserve's most powerful policymakers on Friday pushed back against an increasingly hawkish tone from some other Fed officials worried about inflation, saying he saw no need for the central bank to reverse course.
William Dudley, president of the New York Federal Reserve Bank, said the Fed was "still very far away" from achieving its mandate of maximum sustainable employment and price stability, even though the economy is on a firmer footing. [ID:nN01154414]
"He did not disappoint, other than those hoping that he would change his tune, and those scrambling on the USD bandwagon," said David Watt, strategist at RBC.
While this means further gains in dollar/yen may be difficult, weakness in the yen will most likely continue to be expressed on the crosses, particularly against higher yielding currencies like the Australian dollar, market players say.
The Australian dollar has reached highs not seen since early May 2010 at 87.69 yen earlier on Monday, and was last at 87.35 yen, down 0.1 percent from late U.S. trade on Friday. It has gained roughly 16 percent from a low hit on March 17.
The Aussie also hit a fresh 29-year high against the greenback, reaching $1.0422 earlier on Monday after breaching a barrier at $1.04, which triggered stop-loss buying. (Additional reporting by Reuters FX analyst Rick Lloyd in Singapore)