* Yen hits lowest in more than 2-1/2 years vs dlr, euro
* Euro hits 14-month high vs dollar
* Aussie sags after China official PMI
* U.S. payrolls data next in focus
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, Feb 1 The yen hit multi-year lows against its G3 peers on Friday, having posted its biggest monthly decline in 12 years versus the euro as the market positioned for more aggressive easing from the Bank of Japan.
Supported by diminishing worries about Europe's debt crisis, the euro also hit a 14-month high against the dollar, gaining added momentum after breaching an option barrier.
The dollar rose 0.2 percent to 91.84 yen, having hit a high of 91.87 yen earlier on trading platform EBS, the greenback's strongest level since June 2010.
The euro gained 0.4 percent to 124.97 yen. The single currency touched a peak of 125.05 yen earlier, its highest level versus the Japanese currency since May 2010.
In January alone, the single currency surged nearly 9 percent on the yen, its biggest monthly gain since December 2000, according to Reuters data.
Selling the yen has become an easy one-way bet with newly elected Prime Minister Shinzo Abe heaping relentless pressure on the BOJ to ease monetary policy aggressively to jolt the economy out of a decade long malaise.
Analysts expect further weakness in the yen with some expecting the dollar to rise to 100 yen in time.
"We expect sustained weakness in the yen because of Abe's aggressive policy changes," Michael Sneyd, analyst at BNP Paribas, wrote in a client note. He sees the dollar reaching 95 yen in the first quarter of this year.
In contrast, diminishing worries about Europe's debt crisis and the European Central Bank's relatively more upbeat outlook for the region have made the euro more attractive against the yen and dollar.
"BIG SENTIMENT CHANGE"
The euro rose 0.2 percent to $1.3609. The single currency climbed to $1.3624 earlier on Friday, its strongest level against the dollar since November 2011.
"Euro goes up every day .... It's all just a continuation of what we've been seeing lately. Same kind of portfolio shift, the sentiment is positive," said Jesper Bargmann, Asia head of G11 spot FX for RBS in Singapore.
The euro also pushed higher as traders took aim at and breached option barriers at 125.00 yen and $1.3600, he said.
"Money is going back into Europe... So we're seeing the longer-term investors leaving the safe haven bets, particularly the yen, but we've seen it in sterling as well, we've seen it in Swiss franc," Bargmann said.
"It's a big sentiment change more than anything else," he added.
The Australian dollar slipped 0.2 percent to $1.0408 , coming under pressure after China's official measure of manufacturing activity surprised on the downside, though the impact was lessened by an upbeat reading from HSBC.
China's official purchasing managers' index (PMI) eased to 50.4 in January versus forecasts of 50.9, suggesting the economy is making only a mild recovery.
The HSBC PMI, however, climbed to a two-year peak of 52.3.
All eyes are now on U.S. jobs data due later on Friday.
David Song, currency analyst at DailyFX, said an upbeat reading could add to the case for the Federal Reserve to slowly move away from its easing cycle.
"We may see a growing number of Fed officials scale back their willingness to preserve the highly accommodative policy stance for a 'considerable time' as the world's largest economy gets on a more sustainable path," he said.
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