* Yen hits 3-month low vs dollar, 7-week low vs Aussie
* Talk of new dollar longs as market looks to 100 yen
By Charlotte Cooper
TOKYO, Feb 26 (Reuters) - The yen tumbled to a three-month low against the dollar on Thursday and a seven-week low against the Australian dollar, as bets against it mounted aided by concerns about Japan's economic outlook.
Data showing portfolio flows out of Japan last week underscored the yen's loss of favour as a safe-haven bid, with many now discussing how far it can fall as technical sell signals fuel negative yen sentiment.
The yen has shed more than 10 percent since hitting a 13-year high of 87.10 yen per dollar in January, and short-term speculators have been forced to unwind bets that it would revisit that level, helping push the currency even lower.
"It is possible that the dollar will temporarily rise near 100 yen," Takahide Nagasaki, chief forex strategist at Daiwa Securities SMBC, said in a note to clients.
Nagasaki said the dollar was gaining strength as the yen's outlook, which has been hurt by political uncertainty and low expectations for stimulus plans to help the economy, has shown no sign of improving.
But a rebound in implied volatility for dollar/yen despite its rise towards 100 indicated that market players remained nervous about a sudden reversal in the yen's slide, Nagasaki said.
"Radical action in the U.S. auto sector and a clearer outlook for stability in the financial system are necessary for a decisive rise in the dollar," he said.
The dollar rose as high as 97.98 yen on trading platform EBS, its highest since mid-November and up 0.4 percent on the day.
One-month implied volatility on dollar/yen options has risen to around 18 percent after falling as low as near 16 percent earlier this week.
The euro climbed 0.4 percent to 124.38 yen, after touching a seven-week high of 125.16 yen on Wednesday.
SELL JAPAN?
Foreign investors sold a net 450.8 billion yen ($4.63 billion) of Japanese stocks last week, their biggest net weekly selling since November, capital flow figures showed.
Also, Japanese investors were net buyers of overseas stocks and bonds.
Analysts caution that not all of the foreign bond transactions by Japanese investors seen in the weekly data always involve currency transactions, but some say the numbers suggest there could be more momentum to the yen's fall in the short term.
"Long term it's questionable that it will necessarily last but at least for now there are some early signs that Japanese investors are becoming more adventurous in investing abroad again," said David Mann, a senior currency strategist at Standard Chartered.
"The increasingly worrying signs about economic growth and the potential for Japan to contract even more than other major economies is also something that may be adding to this pressure."
Bank of Japan board member Tadao Noda said on Thursday the economy was worsening more than the central bank had forecast in January.
On the charts, the dollar/yen rate has pushed through some key levels this week, breaking above the 38.2 percent retracement of its August to January fall and the 23.6 percent retracement of its longer-term decline from mid-2007.
Market players have been waiting for signs that Japanese investors are repatriating funds ahead of the fiscal year-end at the close of March.
Many say the repatriation has not yet materialised but some caution it still could, which would then put the brakes on the yen's slide.
The Australian dollar struck a seven-week high of 63.69 yen, according to Reuters data, after figures showing Australia's business spending jumped in the fourth quarter.
The euro edged down to $1.2716, after tumbling 0.8 percent on Wednesday, following data showing the pace of existing U.S. home sales fell 5.3 percent in January, weighing on stocks and rekindling demand for the safe-haven dollar, analysts said. (Additional reporting by Masayuki Kitano and Satomi Noguchi; Editing by Chris Gallagher)