* Yen falls to fresh five-year lows vs USD & euro
* Record-closing high on Wall Street weighs on low-yielding yen
* Sterling reaches highest versus dollar since Aug 2011
LONDON, Dec 27 (Reuters) - The euro pushed towards a two-month high against the dollar on Friday as banks adjusted positions ahead of the year end.
The European Central Bank is conducting an asset-quality review (AQR) which could show that banks require more capital, and which will take a snap-shot at year-end 2013, and this has led to some demand for euros to help shore up their balance sheets, traders said.
"There's a lot of attention on the AQR, and there's some positioning ahead of the end of the calendar year," said John Hardy, FX strategist at Danske Bank in Copenhagen.
The euro gained 0.8 percent to $1.3795, just short of a two-month high of $1.3811.
It has risen more than seven percent from a low hit in July, as the euro zone economy came out of a recession triggered by its debt crisis.
The European Central Bank has not been expanding its balance sheet actively unlike its U.S. and Japanese counterpart, giving an additional boost to the euro.
The yen touched a five-year trough against the dollar and euro, dented by a renewed appetite for risk which lifted U.S. and German equities to record highs and weighed on the low yielding currency.
The Japanese currency is on course to post its ninth consecutive week of falls against the dollar, the longest such period since 1974, when the country was suffering from the aftermath of the oil crisis that started the previous year.
Many economists expect inflation in Japan to peak soon, forcing the Bank of Japan to take additional easing steps early next year, as the economy is likely to face headwind from a sales tax hike in April.
"It looks as if there may be more ahead in terms of easing," said Geoffrey Yu, currency strategist at UBS.
The dollar rose to as high as 105.05 yen before retreating to 104.74 yen, while the euro rose to 144.53 yen - highs not seen since October 2008.
The yen's decline came in thin year-end trade and was a continuation of a well entrenched trend after Japanese authorities this year launched a shock-and-awe stimulus strategy to snap the economy out of years of deflation.
Treasury yields could rise further in 2014 if the Federal Reserve continues to scale back its bond-buying programme, having last week taken the first step towards winding down its massive stimulus plan.
The greenback also advanced against dollar-bloc commodity currencies such as the Australian dollar, but fell against sterling after strong British mortgage data reinforced expectations the Bank of England may raise interest rates sooner than expected.
Sterling reached its highest versus the dollar since August 2011, with a traders citing an option being triggered at $1.65.
It reached a peak of $1.6502 before slipping slightly to $1.6481.