FOREX-Euro shines after unexpectedly strong German data
* German Ifo index higher than forecast
* Euro rises against yen, dollar, sterling
* Yen weakens vs dollar, BoJ's Kuroda says it not abnormally low
NEW YORK, Nov 22 (Reuters) - The euro climbed to a four-year peak against the yen and rose for a second straight day versus the dollar on Friday after much-stronger-than-expected German business sentiment pointed to a continued rebound in Europe's largest economy.
The euro was 0.3 percent up at 136.68 yen, having risen as high as 136.99 yen. Against the dollar, it was 0.3 percent up at $1.3518.
Germany's closely watched Ifo survey of business sentiment rose far more than forecast in November, reaching its highest level since April 2012. That added to positive sentiment about German growth, the engine of the euro zone economy.
A ZEW survey this week also showed German investor sentiment at its highest in four years while a purchasing managers index release suggested the private sector's expansion was gaining traction.
"The enthusiastic IFO report has investors comfortable increasing exposure to the euro this morning, pushing euro/dollar back above $1.3500," said Scott Smith, senior corporate FX trader at Cambridge Mercantile Group in Calgary.
He added that the confidence displayed in Germany during November is positive overall, but noted that recovery in the euro zone's largest economy has failed to bolster the rest of region especially the peripheral nations.
The euro was also supported by comments from European Central Bank President Mario Draghi, who played down the possibility of the bank implementing negative deposit rates.
Reports the ECB would start charging banks to park cash with it overnight had pressured the euro on Wednesday, extending its losses after the release of the Federal Reserve minutes later that day suggesting that U.S. stimulus could be scaled back earlier than expected.
"It's been quite comforting for the market. It saw strong German numbers in the PMIs, which offset (weak French GDP data)," said Ian Gunner, portfolio manager at Altana Wealth.
"It's the whole package of the last two days ... Collectively it has raised a few doubts about whether the ECB is really going to do anything (to ease monetary conditions) this year."
Europe's shared currency also shrugged off comments from ECB Chief Economist Peter Praet that the euro zone faces deflationary pressures.
The dollar hit a four-and-a-half-month high of 101.35 yen on expectations Bank of Japan monetary policy would remain loose and a rise in Japanese stocks to six-month highs on Friday. It was last little changed at 101.11 yen.
BoJ Governor Haruhiko Kuroda said earlier he did not think the yen was at abnormally low levels and he did not see an asset bubble occurring in Japan.
The Nikkei and the yen have been moving in counter-step for months, with every rally in the share index a signal for speculators to sell the yen. A weaker yen tends to boost Japanese exports and earnings, further supporting shares.
Aaron Smith, managing director at currency hedge fund firm Pecora Capital, said short-term technical factors point towards buying the dollar versus the yen.
"We are at a crucial level in dollar/yen. If 101-102 fails, we can see a dive below 100 and resumption of the 300 pip range in the 97-100 region," he said.
"However, we are cautiously optimistic that a breakout of further yen weakening is in the cards for 2014."