* Euro falls after Nowotny says QE has valuable role
* Investors look ahead to December Fed meeting (Recasts, changes byline, dateline from previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 8 (Reuters) - The dollar slid from a seven-year high against the yen and a two-year peak versus the euro on Monday, as investors consolidated gains made following a strong U.S. jobs report that is expected to trigger an interest rate increase next year.
The greenback's outlook remained upbeat despite Monday's fall. Investors were already looking ahead to the December monetary policy meeting of the U.S. Federal Reserve next week, watching for a change in the statement's language to a more hawkish tone.
"We're drifting off in the dollar and this is just consolidation," said Shaun Osborne, chief currency strategist at TD Securities in Toronto. "All the signs point to a stronger dollar. Oil prices are down, we have a Fed meeting next week and some are pointing to a possible change in language."
Earlier in the session, the dollar soared to a fresh two-year high against the euro, a seven-year high versus the yen and touched a five-year peak versus a currency basket. It also rose to its highest in 15 months versus the pound.
The euro stumbled after a leading European Central Bank policymaker said government bond buying could be valuable in addressing the "massive" weakening of the euro zone economy.
Ewald Nowotny, the Austrian central bank chief, has been a bellwether for shifts in ECB policy, and has been seen as part of the German-led group on the ECB's governing council opposing what is viewed as outright money printing.
The euro fell to a low of $1.2247 after Nowotny's comments, then flat on the day at $1.2284.
"Markets are pretty much pricing in a Fed rate hike by the middle of 2015 and a growing likelihood of the ECB unleashing full scale QE (quantitative easing) in the months ahead," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The dollar surged to 121.84 yen, before falling 0.6 percent to 120.84 yen. Dealers said the yen was supported by around $2 billion worth of options expiries at 121.50 yen per dollar, putting a cap on the dollar's strength.
Japan's national election on Dec. 14 is seen as likely to give a boost to Prime Minister Shinzo Abe and reflationary policies that should further weaken the yen.
The dollar index climbed as high as 89.550, its highest since March 2009. The index was last at 89.279, slightly lower on the day. (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Jeffrey Benkoe)