By Richard Hubbard

LONDON, Feb 18 (Reuters) - The euro and the dollar gained

against the yen on Monday after the G20 decided not to criticise

Japan for its expansionary policies, but Europe's weak growth

outlook and the approach of Italian elections capped the moves.

Financial leaders from the world's 20 biggest economies

promised in their final statement after a weekend meeting not to

devalue their currencies to boost exports, in a bid to defuse

talk of currency wars among major nations.

The euro gained 0.15 percent to 125.20 yen,

edging up toward a 34-month high of 127.71 yen hit earlier this

month, while the dollar rose 0.5 percent to 93.99 yen,

closer to its highest since May 2010 of 94.46 hit on Feb. 11.

'Future yen direction will continue to be driven by domestic

monetary policy from the Bank of Japan and improving

international investor confidence, which are both driving the

yen weaker,' said Lee Hardman, currency analyst at Bank of

Tokyo-Mitsubishi UFJ.

With the G20 meeting over, the focus in European markets is

switching to the release of euro area Purchasing Managers'

Indexes for February and German sentiment indices due later in

the week, and the upcoming general elections in Italy.

Analysts expect the euro area flash PMI indices, which point

to economic activity around six months out, to show growth

stabilising rather than a clear end to the current recession

across the region.

The FTSEurofirst 300 index of top European shares

opened down 0.1 percent at 1,159.87 points, with Germany's DAX , the UK's FTSE and France's CAC-40 flat

to slightly weaker.

Earlier, the effect of the G20 statement and further

announcements from Japan's Prime Minister Shinzo Abe indicating

a renewed drive to stimulate the economy lifted the Nikkei stock

index by 2.1 percent, near to its highest level since

September 2008.

Meanwhile U.S. stock futures were barely changed and

are expected to stay little changed as Wall Street will be

closed on Monday for the Presidents' Day holiday.

In the commodity markets, copper fell 0.7 percent to

$8,150 a tonne as traders played catch up after a week-long

holiday in China last week, with worries about the euro zone

economy weighing on sentiment.

U.S. crude fell 34 cents to $95.50 a barrel but

Brent inched up six cents $117.70.

Gold rebounded by 0.3 percent from a six-month low to

be $1,614 an ounce as jewellers in China returned to the

physical market after the Lunar New Year holiday.

(Reporting by Richard Hubbard. Editing by Giles Elgood)

((richard.hubbard@thomsonreuters.com)(Tel +44 207 5423215))

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