* Euro hits 2-month high vs yen of 127.64 on QE view
* European shrs up 2 percent, helping euro/dlr to 2-1/2 wk high
* Euro holds near recent highs vs Swissie after SNB action
* Focus now on Japan, though yen intervention not expected
(Updates prices, adds quotes, changes byline)
By Kirsten Donovan
LONDON, March 13 (Reuters) - The euro jumped to a two-month high against the yen supported by solid gains on equity markets and by concerns that the Bank of Japan may follow the Swiss National Bank into unconventional policy measures.
The single currency pared earlier gains against the dollar and the Swiss franc but remained broadly supported by the SNB's action to weaken the Swiss franc by buying euros and dollars on Thursday, with traders anticipating further such moves.
The SNB said on Thursday it would buy foreign currencies and bonds -- so called "quantitative easing" -- as the country faces its worst recession in over three decades.
And after a similar move by the Bank of England last week, markets are wondering who might be next.
"People are starting to think a lot more about what QE means for currencies, so far we've only had the Bank of England and the SNB explicity engage in it and the currencies have done very badly, said Adarsh Sinha, a currency strategist at Barclays Capital.
"The question now is who will be next and the obvious ones are those with rates near zero, the Federal Reserve and Bank of Japan. Currency moves since yesterday have partly reflected that with the dollar and the yen the worst G10 performers."
The euro benefited from the view that the European Central Bank is unlikely to move to quantitative easing any time soon and the single currency's trade-weighted index hit its highest level since early January on Thursday.
At 1127 GMT, the euro was up 0.3 percent at 126.63 yen, after earlier touching a two-month high of 127.64 yen, Reuters charts showed.
The euro was down 0.15 percent at $1.2889, just below an earlier 2-1/2 week high of $1.2956 as several days of equity market gains helped spark a slight ebbing in the market's aversion to risk.
Traders said the euro's turn lower versus the dollar was driven by falls in other crosses, particularly euro/sterling as stock market gains underpinned the pound.
The dollar was also firmer against the Japanese currency, rising 0.5 percent to 98.25.
Against the Swiss franc, the euro was down a fifth of a percent at 1.5307 francs, having earlier touched a two-month high of around 1.54 francs on the EBS trading platform. The single currency surged over 3 percent on Thursday after the SNB action.
FOCUS ON BOJ
Though most analysts see it as unlikely, people are questioning whether Japanese authorities will opt for a similar policy of combining unconventional monetary policy measures with intervention in foreign exchange markets.
Japanese authorities have not intervened in the foreign exchange market since March 2004 after a 15-month, 35 trillion yen ($359 billion) selling spree aimed at preventing a strong yen from snuffing out an economic recovery.
Masahiro Sato, joint general manager of the treasury division at Mizuho Trust & Banking Co. in Tokyo, said that while smaller economies may feel pressure to weaken their currencies the same would not apply to Japan.
"Competitive currency devaluation is not likely in Japan now because the risks of sparking trade friction are too great. The Swiss can get away with this because of the relatively small size of their economy and the limited role they play in the global economy," Sato said.
Elsewhere, investors were awaiting the outcome of a meeting of Group of 20 financial leaders in England this weekend, where they will discuss how to fight the global economic crisis.. (Additional reporting by Charlotte Cooper in Tokyo; editing by Stephen Nisbet)