* Euro/yen hits 11-mth high; Aussie/yen hits 2-1/2 yr peak
* Yen crosses later pare gains
* RSI, stochastics suggest cross/yen overbought
* Dollar index nears 16-mth low
* Dollar extends recent losses vs some Asian currencies (Updates prices throughout, adds quotes)
By Ian Chua and Masayuki Kitano
SYDNEY/SINGAPORE, April 11 - The yen fell to an 11-month low against the euro and a 2-1/2 year trough versus the Australian dollar on Monday, and looked set to weaken further as investors piled into carry trades in favour of higher-yielding assets.
The U.S. dollar dipped back in the direction of last week's 16-month low against a basket of major currencies, hurt by positive signs for investor risk-taking, and also extended its recent losses against some Asian currencies.
While some technical gauges suggested that rallies in the euro and the Australian dollar against the yen could pause in the near-term, traders said the broader trend of yen weakness was likely to remain intact.
"If you look at gauges such as stochastics...they are clearly in overbought territory," said Tsutomu Soma, senior manager for Okasan Securities' foreign securities department in Tokyo, referring to the recent rally in the euro and other currencies against the yen.
"But the yen could easily come back under pressure if there is some type of catalyst, so I think market players are reluctant to unload their entire position," Soma said.
"People might sell the euro against the yen in the morning but they will probably make sure to buy it back in the evening," he added.
The euro earlier touched its highest against the yen since May 2010 of 123.33 yen on trading platform EBS, up about 16 percent from its mid-March low of 106.50 yen.
The euro later trimmed its gains and last stood at 122.62 yen , down 0.1 percent from late U.S. trade on Friday.
The yen has fallen sharply in the wake of joint yen-selling intervention by the Group of Seven industrialised nations in March.
The G7 stepped in after the yen hit a record high of 76.25 yen to the dollar on March 17, propelled by speculation that Japanese investors would repatriate their overseas assets after a massive earthquake and tsunami struck Japan's northeast on March 11.
Market expectations for the Bank of Japan to lag behind other central banks in raising interest rates and a drop in volatility after the G7 intervention have shifted the market's focus to the appeal of carry trades, a tactic of selling low-yielding currencies to fund investment in higher-yielding currencies.
SIGNS OF OVERHEATING
Technical gauges such as the 14-day relative strength index and slow stochastics suggest that the euro and Australian dollar are in overbought territory against the yen, pointing to the possibility of a near-term pull-back.
Positioning in the Australian dollar also looks stretched judging from the U.S. Commodity and Futures Trading Commission's latest data, which showed that currency speculators held a record long position in the Aussie dollar in the week to April 5. [ID:nN08255295]
The Australian dollar touched a high of 90.04 yen earlier on Monday, its highest since September 2008. It later pared some of its gains and was last up 0.1 percent at 89.64 yen .
The Aussie dollar rose 0.1 percent against the dollar to $1.0573 , near Friday's 29-year high of $1.0585.
In a positive sign for global growth and risk trades, Chinese data on Sunday showed exports and imports were both stronger than expected in March, with little sign of any impact from the Japanese quake. [ID:nL3E7FA00N]
The euro dipped 0.2 percent to $1.4461 , but was still not far from a 15-month high around $1.4490 struck on Friday.
"Asian central banks have been extremely active, and with oil prices moving higher once again, we expect further FX reserve diversification to push EUR yet higher. The break of 1.4375 now opens up the way for a move to our target of 1.4500," BNP Paribas analysts wrote in a note.
They said the preference for using the yen and dollar as funding currencies will probably continue until oil prices hit a tipping point, where the de facto tax on big oil-consuming nations forces a downgrade of growth expectations.
Brent crude hit a 32-month high at $127.02 a barrel on
Monday
The dollar dipped 0.2 percent against a basket of currencies to 74.932 , near Friday's 16-month low of 74.838.
The dollar continued its downtrend against emerging market currencies, hitting a fresh record low against the Singapore dollar and a seven-year trough versus the Indonesian rupiah on Monday. [ID:nL3E7FB043] [ID:nL3E7FB084]
The dollar did manage to eke out gains against the yen, however, inching up 0.1 percent to 84.80 yen . The dollar faces a cluster of resistance at levels around 85.50 yen, including a six-month high of 85.53 yen hit last week on EBS. (Additional reporting by Jongwoo Cheon in Singapore; Editing by Kim Coghill)