TOKYO, Feb 5 The yen rose against the euro and the dollar on Monday as investors covered

TOKYO, Feb 5 (Reuters) The yen rose against the euro and the dollar on Monday as investors covered short yen positions ahead of a meeting of Group of Seven finance officials later in the week.

The G7 meeting in Essen, Germany, on Feb. 9-10 is in the spotlight because European officials have been pushing for discussion of the yen's weakness, although their Japanese and U.S. counterparts have been playing down the issue.

''Speculation leading up to the G7 is going to whip the yen around this week,'' said Hideaki Furumaya, a forex manager at Trust and Custody Services Bank.

In addition, traders said euro sentiment continued to slide after a report by Market News International late last week that ''well-informed sources'' had said the European Central Bank could refrain from raising rates for a while after its next rise.

The dollar was down nearly 0.3 percent at 120.75 yen hovering near the day's low around 120.70 yen.

The U.S. currency pulled back from 121.37 yen touched on Friday, when data showed that the U.S. economy added 111,000 jobs in January.

The number had fallen short of expectations, but an upward revision to previous months indicated the economy was on a solid footing. This supported the view that the Federal Reserve may not lower rates soon, helping keep the dollar within range of a four-year high against the yen hit a week ago.

The U.S. currency's slip on Monday was triggered by a fall in the euro against the yen to around 156.30 yen down from a record high of 158.62 yen touched last month.

The single currency was at $1.2945 down around 0.2 percent on the day and retreating from a one-month high against the dollar hit on Friday around $1.3070.

YEN TO STAY WEAK Market participants said slight short covering in the yen on Monday was to be expected given that short positions in the currency have hit record highs for three straight weeks, although they added that the overall yen-selling trend was far from over.

The yen's real, trade-weighted value plummeted to a 21-year low in January, highlighting the currency's broad weakness thanks to its 0.25 percent yield, which lags its currency rivals by far.

Currency researchers at JPMorgan said that while short yen positions left the dollar/yen susceptible to a near-term pullback, they did not expect an official G7 complaint about the yen when the meeting ends.

''While the market will remain sensitive to official yen comments in the week ahead, in turn suggesting caution on positions, overall we do not see the G7 changing the medium-term bearish yen picture,'' they said in a client note.

With the market fixated on global rates, investors were eyeing a host of central bank policy meetings this week, given a limited amount of major economic data in coming days.

The ECB holds a rate meeting on Thursday at which it is widely expected to keep rates steady at 3.5 percent. The Bank of England is expected to keep rates unchanged at 5.25 percent at a gathering the same day.

Likewise, the Reserve Bank of Australia is seen keeping rates on hold at 6.25 percent when it announces its rate decision on Wednesday.

REUTERS CS VV1138