* Italian election sees rise of anti-euro parties
* Euro draws support from German coalition deal
* Dollar hampered by concerns over trade war
* BOJ confirmation hearing offers few market cues
TOKYO, March 5 (Reuters) - The euro fell on Monday, hitting a six-month low versus the yen, after Italian election results pointed to stronger-than-expected showing for euro-skeptic parties, with no major party blocs winning an outright majority.
The euro zone's third biggest economy now faces a prolonged period of political instability after voters delivered a hung parliament, spurning traditional parties and flocking to anti-establishment and far-right groups in record numbers.
The euro fell 0.3 percent and was traded at $1.2282, edging towards its seven-week low of $1.21545, which it touched on Thursday. Against the yen it fell to 129.35 yen, its lowest level since late August.
Although no party won a majority, the anti-establishment 5-Star Movement came out as a clear winner, looking set to become the largest single party by a wide margin.
The center-right bloc, made up of former prime minister Silvio Berlusconi's Forza Italia, and the far-right League and Brothers of Italy, is set to win most seats but is seen falling some way short of an absolute majority.
But in a bitter personal defeat for the billionaire media magnate, his Forza Italia party was overtaken by its ally, the far-right, anti-immigrant League.
Investors are likely to take fright at any suggestion the 5-Star could form a coalition with the right-wing League.
Initial tallies suggested the two forces would have enough seats to govern together and they have in the past shared strong anti-euro views. While the League still says it wants to leave the single currency at the earliest feasible moment, the 5-Star says the time for quitting the euro has passed.
"(The euro) gained in early Asian trade, perhaps due to the German vote, but then started turning down as the results from Italy began coming in. I'd expect it to weaken further today as the market absorbs the results of the Italian election," said Marshall Gittler, chief strategist at ACLS Global.
The euro started the week on a solid footing as two-thirds of SPD members supported the coalition, clearing the way for a new government in Europe's largest economy after months of political uncertainty.
The common currency found some support as Germany's Social Democrats (SPD) decisively backed another coalition with Chancellor Angela Merkel's conservatives.
The U.S. currency was also on slippery footing after President Donald Trump last week proposed tariffs on imported steel and aluminum, raising fears of retaliation from its trade partners that could trigger a trade war.
"Now that European election outcomes are turning out to be as expected, a potential trade war between the United States and the rest of the world is once again the focus," said Daisuke Karakama, chief market economist at Mizuho bank.
"Some call it just a bluff but I think things today are more serious than a year ago."
The dollar was softer against the yen at 105.39 yen, near Friday's 16-month low of 105.24.
Bank of Japan Governor Haruhiko Kuroda said the BOJ would consider an exit from its ultra-easy monetary policy if it met its inflation target in the next fiscal year from April 2019.
The market has so far shown muted response to comments from two nominees for BOJ Deputy Governors, the bank's executive director Masayoshi Amamiya and Waseda University professor Masazumi Wakatabe at their confirmation hearing in the parliament.
Traders will be looking at China's National People's Congress (NPC), which kicked off its annual meetings on Monday, and U.S. ISM non-manufacturing index for February, due later in the day. (Reporting by Hideyuki Sano and Tomo Uetake; Editing by Kim Coghill and Sam Holmes)