* Major German parties reach deal on grand coalition * Euro at near one-month high vs dollar * Volume light before U.S. Thanksgiving holiday * Dollar hits six-month high vs yen as Treasury yields rise By Julie Haviv NEW YORK, Nov 27 (Reuters) - The euro rose to its highest in four years against the yen and a near one-month peak versus the dollar on Wednesday as investors embraced risk following news Germany's two major parties had formed a grand coalition deal. German Chancellor Angela Merkel's conservatives clinched a deal with the Social Democrats, triggering a relief rally for the euro. A new government should be formed before year-end. Lengthy coalition talks had delayed movement on major European reforms, including the creation of a unified banking system, an ambitious project designed to prevent a recurrence of the euro zone's crippling debt crisis. Volume, however, was light ahead of Thursday's Thanksgiving Day holiday, during which U.S. financial markets will be closed. "The news removed some political uncertainty and helped lift the euro," said Omer Esiner, chief market analyst at Washington, D.C.-based Commonwealth Foreign Exchange. "While on a firm footing, the euro will likely struggle to add significantly to its current gains as investors remain worried about further monetary easing from the European Central Bank in the months ahead," he said. The euro also garnered support from a survey showing German consumer sentiment at a six-year high. This followed unexpectedly robust Ifo business sentiment figures issued last week. The euro last traded up 0.1 percent at $1.3578, below an earlier high of $1.3612, its strongest since Oct. 31. The single currency rallied against Japan's currency, rising as high as 138.80 yen, giving it the potential to target the 2009 peak of 139.26 yen. It last traded at 138.58 yen, up 0.8 percent on the day. "The coalition agreement in Germany suggests an expansionary budget, which should be positive for the euro," said Hans Redeker, head of global foreign exchange strategy at Morgan Stanley. However, he said levels above $1.36 provided opportunities to sell the euro, which has gained more than 2 percent since the European Central Bank cut interest rates earlier this month. Euro zone inflation data on Friday is expected to show a small acceleration, an outcome that could help the euro. The ECB will not embark on a program of outright asset purchases to revive a sputtering recovery, a Reuters poll found on Tuesday, suggesting German-led opposition will succeed. Meanwhile, the dollar also rallied against the yen on higher U.S. Treasury yields and month-end positioning. Treasury prices, which move inversely to yields, fell as data suggested further healing of the labor market. The number of Americans filing new claims for unemployment benefits unexpectedly fell last week. While the jobs picture is brightening a bit, factory activity appears to be losing momentum, with business spending on capital goods weakening and new orders for long-lasting manufactured goods falling last month. Separate data showed U.S. consumer sentiment rose in November as wealthier Americans' outlook on the economy improved. Additionally, a measure of future U.S. economic growth rose to a nine-week high while the annualized growth rate also gained. The dollar index, which tracks the greenback against a basket of six major currencies, last traded 0.1 percent higher at 80.674. The dollar reached 102.18 yen, its highest since May 29. It last traded 0.8 percent higher at 102.08 yen, according to Reuters data.

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