* Yen weakens broadly as market wary of more G7 action
* Volatility in yen falls after last week's intervention
* Euro rises above $1.42, highest since November
(Adds details, updates prices)
NEW YORK, March 21 (Reuters) - The yen fell against the dollar for a second straight day on Monday, with investors wary of more central bank selling to weaken the Japanese currency, though markets could test authorities' resolve by pushing the pair back toward the 80 level.
Traders said Friday's coordinated invention by the world's major central banks -- the first such move since 2000 -- had been successful for now, as the dollar stabilized around 81 yen and yen volatility retreated from recent highs.
In the near term, analysts said the 80 to 80.85 area could serve as a floor for the dollar against the yen, and a fall below could see renewed intervention by central banks. On the upside, resistance is seen around 82 yen, the post-intervention high set on Friday.
"The market is certainly very wary about central banks being on the sidelines," said Dean Popplewell, chief currency strategist at OANDA in Toronto.
"The market is also questioning who would be intervening if the yen does start to appreciate, whether it will be the Bank of Japan on its own or it will be another coordinated intervention. But at the moment, nobody is willing to test the waters," he added.
The dollar last traded up 0.5 percent at 80.96 yen on electronic trading platform EBS, moving further away from a record low of 76.25 yen set on EBS last week.
Traders said the pair was boosted by demand from model-generated trading accounts, while offers were seen at 81.30/50 and 82.00. Strong resistance lies around 84 yen, a level that will attract offers from Japanese exporters.
Jon Wetreich, currency strategist at Brown Brothers Harriman in New York, said the dollar/yen will trade in a range of 80.50 to 82.
"Markets tend to test intervention levels and central bank commitment, and thus we expect a test of at least the 80.50 level this week," he said.
Morgan Stanley in a note said their flows data indicated very strong demand for yen last week, with clients buying yen in large amounts with record high trading volumes in yen crosses.
Traders and analysts say the Bank of Japan, the European Central Bank and Bank of Canada together conducted around $32.3 billion worth of yen-selling intervention Friday. Nomura estimates the Federal Reserve spent about $1 billion. Estimates for the Bank of England were not immediately available.
Barclays Capital in a note said that "Japan can sell as much as it desires, as there is potentially no limitation on selling its own currency." For the other G7 countries, the firm said they have more than $53 billion in yen reserves, which "appears sufficient for a while at face value."
RETURN OF CARRY TRADES?
Stocks rallied in part on a glimmer of hope about Japan's nuclear crisis following a massive earthquake 10 days ago, further encouraging investors to wade back into riskier assets, which often involves selling yen to finance purchases. Intervention has succeeded in bringing down implied volatility on dollar/yen, with one-month trading at around 12 percent, well off about 21 percent on Thursday.
The yen also fell against other major currencies. The euro was last up 0.4 percent while the Australian dollar rose 1.1 percent and the Canadian dollar advanced 0.8 percent versus the yen.
Analysts said positive risk appetite, expectations that Japanese money market rates will remain low and the Bank of Japan putting a cap on the yen's rise meant conditions supported at least some yen-funded carry trades.
"Carry trades can be put back on, but in places where yields are more likely to rise and where there's more value, such as Canada, Scandinavia or even the euro," said Adrian Schmidt, currency analyst at Lloyds Banking Group.
The euro was last up 0.2 percent at $1.42110 after rising to $1.42177 on EBS, a 4-1/2-month high. Expectations the European Central Bank will lift interest rates at its next meeting in April have supported the euro.
Against a basket of currencies, the dollar fell to 75.428, its lowest level since December 2009. (Reporting by Nick Olivari and Wanfeng Zhou; Editing by Kenneth Barry)