By Anirban Nag LONDON, Oct 27 (Reuters) - The euro hit a seven-week high against the dollar on Thursday and riskier currencies rallied, boosted by a deal to tackle the euro zone debt crisis that provided relief to sceptical investors and prompted an unwinding of bearish positions. EU leaders and banks reached a deal on a 50 percent writedown for private bondholders on their Greek debt, and agreed to recapitalise European banks and scale up the size of the euro zone's 440 billion euro ($600 billion) bailout fund. The euro rose nearly 1 percent on the day to $1.4038 , breaking through a wall of orders and charging past stop-loss points on the way. It was last trading around $1.3995 with large offers ahead of a $1.4050 barrier likely to cap the euro's gains, traders said. "The package got a few more numbers in it than many had expected," said Paul Robson, currency strategist at RBS Global Banking. "The market was short risk and long dollars, so this has boosted the euro. But above $1.40, the air is a bit thin for the euro and it is likely to struggle." While the euro zone's EFSF rescue fund will be leveraged four or five times to about 1 trillion euros, EU finance ministers are not expected to agree until November on the nitty-gritty elements of how the scaled-up facility will work. Against the yen, the euro was 0.2 percent higher at 106.16 yen . High-yielding currencies also rose, with the Australian dollar jumping more than 1.3 percent to a seven-week high of $1.0554. DOLLAR/YEN NEAR RECORD LOWS While the summit package is seen as adequate to avoid a euro zone-driven financial market catastrophe in the near term, doubts remain whether it can improve the region's growth prospects. Recent data out of the euro zone has backed views that the region was flirting with recession. The European Central Bank meets next week and chances are high it will play its role by flagging interest rate cuts in the coming months. Morgan Stanley said in a note that although more near term gains in the euro are expected following the deal, it was looking at establishing renewed bearish positions once the euro rebounds into the $1.4060 area. RBS's Robson felt the market would, for now, switch to the fiscal problems in the United States. Data later in the day is likely to show the U.S. economy accelerated in the third quarter driven by temporary factors, with growth likely to slow again. The dollar zeroed in on a record low against the yen after the Bank of Japan, as widely expected, decided to ease policy by expanding asset purchases by 5 trillion yen ($65.8 billion) to 20 trillion yen. The dollar was down 0.4 percent at 75.85 yen , not far from the record low of 75.71 yen plumbed the day before. That was because some funds that went long dollars, expecting that Tokyo would deliver a "double punch" of easing and intervention at the same time, started cutting positions. A senior trader for a Japanese bank in Tokyo said that the monetary easing by the Bank of Japan was expected, leaving foreign investors who had been expecting something extra, disappointed. The trader added retail and interbank dealers were still sticking to their dollar/yen long positions. "Modest monetary easing from the BoJ, which is faced with an ongoing deflation threat, is unlikely to derail the yen strengthening trend ahead," Bank of Tokyo Mitsubishi UFJ said in a note. Traders also cited talk of an options barrier at 75.50 yen and a bigger one at 75.00 yen. Traders also warned of chunky stop-loss dollar offers at 75.00 yen. The move in the euro and other risk currencies saw the dollar index hit a new seven-week low of 75.595.

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