The dollar hit a 3-1/2 month high versus the yen on Friday as hopes Greece would soon sign a deal for a second bailout boosted appetite for risk, adding to a selloff in the Japanese currency sparked by further monetary easing in Tokyo this week. The euro [EUR= 1.3176 0.0042 (+0.32%) ] sat well above three-week lows hit against the dollar, and riskier currencies were boosted after euro zone officials said on Thursday they were putting the finishing touches to Greece's bailout for approval on Monday. A confirmed deal would further underpin currencies more sensitive to risk like the Australian dollar [AUD= 1.0759 0.0003 (+0.03%) ]. The yen [JPY= 79.34 0.44 (+0.56%) ] was the biggest mover on the day, hitting a 6-1/2 month low versus the Australian dollar and a two-month trough against the euro as the Bank of Japan surprised markets this week by boosting its asset buying scheme by $130 billion. "The selloff in the yen is down to a combination of a more buoyant mood in equities and the determination of the Japanese authorities to weaken the currency by injecting more money into the economy," said Michael Derks, chief strategist at FXPro. "It would be a surprise though if we saw much more yen weakness as we could see a flood of yen purchases in March as Japanese year-end approaches." The dollar rose to a high of 79.187 yen on trading platform EBS, the highest level since Oct. 31 when Japan sold a record 8.07 trillion yen in currency intervention after the dollar hit a post-World War Two record low of 75.311 yen. The dollar is up so far this week against the Japanese currency. Traders reported offers at 79.30/50 placed ahead of the post-intervention high on Oct. 31 at 79.553. The dollar, which breached its 200-day moving average earlier this week, is now testing the 55-week moving average at 79.12 yen. Higher up, the dollar faces major resistance in the 79.73 to 80.94 yen area, a range formed by the cloud on the weekly Ichimoku chart, a popular technical analysis tool. Against the yen, the euro hit a two-month high at 104.06 yen at one point, and last stood at 103.75 yen, up from late U.S. trade on Thursday. Upbeat U.S. jobs and factory activity data on Thursday continued to support the dollar against the Japanese currency, with the strength of the U.S. recovery suggesting U.S. yields could head higher and further underpin the pair. "The near-term seems awfully likely to take dollar/yen higher," said Ray Farris, chief Asia strategist for Credit Suisse in Singapore. Credit Suisse has a dollar/yen target of 80 yen in three months. Euro Clinging On The euro clung to the previous day's gains, supported by hopes Greece would now avoid a hard default on its debts in March. The single currency was little changed at $1.3124., above Thursday's low of $1.2974. "The euro was looking like death yesterday but has crept back above 1.31. The price action is intriguing in that attempts to sell the euro over recent weeks and have been seen as buying opportunities," said Derks. "There is now the sense that something will be cobbled together on Greece." Many in the market were skeptical over the euro's ability to rally significantly. Greece's bailout money will be disbursed only after a parallel debt restructuring takes place and jitters remain due to the tight schedule, with Greece needing to secure the funds before March 20, when it needs to pay back debt worth 14.5 billion euros. The better tone for the euro underpinned riskier currencies. The Australian dollar was close to flat for the day at $1.0760, above a two-week low hit on Tuesday of 1.0629.

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