FOREX-Euro gains as banks bring home assets for year-end

* Euro helped by banks repatriating funds, Draghi comments

* Yen weakest major currency this year

* Swedish crown rises after strong retail sales

By Laurence Fletcher

LONDON, Dec 30 (Reuters) - The euro rose against the yen and dollar on Monday, driven by euro zone banks drawing back foreign-held assets before year-end and the European Central Bank chief's comment that there was no urgent need to cut rates.

The euro was 0.3 percent up against the yen at 144.89 yen, having hit a five-year high of 145.675 yen on Friday, with the Japanese currency weighed down by expectations the Bank of Japan will announce more money-printing.

The euro was up 0.2 percent against the dollar at $1.377, having shot up as high as $1.3894 in thin year-end trade on Friday, its highest since October 2011. It has risen more than 4 percent against the dollar in 2013 and is set for a second straight year of gains.

The euro's strength this year has baffled many commentators and investors, who had expected tough economic conditions in some member states to weigh on the single currency.

However, it has been boosted by euro zone banks repatriating funds ahead of the year-end to shore up their capital bases before an ECB Asset Quality Review (AQR), and repaying cheap crisis loans to the ECB, which tightens liquidity.

It was also supported by comments from ECB President Mario Draghi, who said in an interview with German news magazine Spiegel published on Saturday (Shenzhen: 002291.SZ - news) that he sees no urgent need to cut the euro zone's main interest rate further and no signs of deflation.

"We're watching the economic hard data in euro land, which has certainly weakened," said Hans Redeker, head of global currency strategy at Morgan Stanley (Xetra: DWD.DE - news) . "(But) the market is still keen to believe those (Draghi's) type of words."

However, many commentators think the euro could weaken early in 2014 once the AQR is out of the way.

"We remain sceptical of euro strength and will be watching funding rates in the first days of the new year for signs that the liquidity squeeze which supported the euro mid-December is continuing to fade," said BNP Paribas (Milan: BNP.MI - news) analysts in a note.

The euro was 0.6 percent down against the Swedish crown at 8.9016 crowns after November retail sales in Sweden rose more than expected.

The dollar hit 105.415 yen, its highest level since October 2008, in Asian trading but gave back gains to stand marginally down at 105.14 yen.

The yen has been the weakest major currency this year, weighed down by the BOJ's pledge to keep interest rates low.

The dollar has gained 21 percent against the Japanese currency while the euro, the strongest major currency in 2013, has risen 26 percent.

Morgan Stanley's Redeker cited the Bank of Japan's plans to increase its balance sheet and Japanese investors buying euro zone government bonds as weighing on the yen.

But he added: "It's a very thin marketplace, so it only needs a bit of liquidity to take the market into some type of significant price action."