* Euro jumps to highest in 8 months against dollar
* U.S. quantitative easing worries weaken the dollar
* USD erases earlier gains vs yen triggered by BOJ moves
(Rewrites, updates prices, adds quote)
NEW YORK, Oct 5 (Reuters) - The euro jumped against the dollar to its highest since February on Tuesday as concerns about further U.S. quantitative easing overshadowed an unexpected interest rate cut from the Bank of Japan.
In volatile trading the yen fell close to the level that triggered the Bank of Japan's September 15 intervention.
Earlier in the global trading day, the yen temporarily fell after the BOJ surprised markets by cutting its key overnight rate target to 0-0.1 percent from 0.1 percent and said it would create a pool of funds to buy assets in the face of evidence that a stronger yen was hurting Japan's economy.
Analysts said the BOJ's moves were not sufficient to halt the downward trend in dollar/yen, with the U.S. currency pressured by falling U.S. bond yields and expectations the Federal Reserve will implement fresh quantitative easing.
The yen's fall stalled just ahead of 84.00 yen per dollar, then erased gains in tandem with the rise in euro/dollar, leaving intact expectations more Japanese intervention will be needed to curb yen gains versus the dollar.
"The focus is squarely on central banks with acceptance of the potential for further Fed-induced quantitative easing driving dollar weakness," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.
In the New York morning, the euro was up 1.1 percent at $1.3832, off a session high of $1.3851, the highest since February 4.
Traders reported Asian central bank buying of euros against the dollar, while a U.S. bank was also seen buying, driving it up sharply from well below $1.3700. Asian central banks have been diversifying their currency reserves away from the dollar, particularly towards the euro.
Elsa Lignos, currency strategist at RBC, said the euro bounced above a trend support line which runs back to where a rally began in mid-September.
"If some people were thinking of changing their bullish euro view, this latest move may have changed their mind," Lignos said
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The dollar briefly pared losses against the euro after a report showed the U.S. services sector expanded slightly more than expected in September, but the impact was fleeting.
"In terms of data we are in a sweet spot where indicators no longer point to a double-dip recession," said Vassilli Serebriakov, currency strategist at Wells Fargo Bank in New York. "But as far as the dollar is concerned, the recent numbers are not strong enough to detract the Fed from pumping more stimulus to the economy."
The euro's sharp gains pushed the dollar index to its weakest since January at 77.698, while the dollar hit a 2-1/2 year low versus the Swiss franc.
Talk of the United States adopting more quantitative easing grew after Chairman Ben Bernanke said on Monday more Fed asset purchases could further ease financial conditions.
Analysts said the fact the European Central Bank has not hinted at policy easing measures was seen as positive for the euro, which shrugged off a Moody's warning that the agency might cut Ireland's debt ratings.
Against the yen, the dollar was down 0.3 percent at 83.07 yen, reversing a climb to a session high of 83.99 yen on electronic trading platform EBS after the BOJ decision. The EBS low was 82.96 yen.
The yen fell against other currencies, however, with the euro up 0.8 percent at 114.95 yen.
"The BOJ's move will cap yen appreciation, but they will need to come in and intervene if dollar/yen is to go beyond 85/86 -- or would need to see a trough in U.S. rates and yields which is the main driver of dollar/yen downside," said Societe Generale currency strategist Kit Juckes.
The dollar hit a 15-year low of 82.87 yen last month, prompting Japanese authorities to intervene to stem yen gains for the first time in more than six years. (Reporting by Nick Olivari; additional reporting by Jessica Mortimer in London; Editing by Padraic Cassidy)