FOREX-Norwegian crown hits 3-month high, yen up after China data

* Norwegian crown supported by Bayer (Milan: BAY.MI - news) -Algeta (Other OTC: ALGZF - news) deal

* Euro falls after German Ifo, fails to break 7-week high

* Yen gains on soft China housing data, fall in Asian stocks

By Laurence Fletcher

LONDON, Feb 24 (Reuters) - The Norwegian crown jumped to its highest level against the euro in three months, while the yen was higher on Monday as investors sought safe havens after soft China house price data.

The euro gained ground against the dollar early on after a better-than-forecast German business survey, but later fell back to trade lower.

It tumbled 0.8 percent to 8.2737 Norwegian crowns per euro , its lowest level since late November.

While strategists said there was no economic data driving the move, Erica Blomgren, chief strategist in Norway for SEB (Paris: FR0000121709 - news) , pointed to German drug firm Bayer's $2.9 billion deal to buy Norwegian cancer drug maker Algeta, announced on Monday.

The euro rose as high as $1.3772 against the dollar after the closely watched German Ifo survey beat expectations.

But it failed to break through its seven-week high of $1.3773 hit last week, and later fell back to trade 0.1 percent lower at $1.3724, with ECB President Mario Draghi's comments over the weekend that Europe's recovery was "still fragile" weighing on the shared currency.

SEB's Blomgren said she expects the euro to trade around the $1.35 mark or around current levels, supported by investment flows into the euro zone.

"(The economy is) looking better in the euro zone," said Erica Blomgren, chief strategist in Norway for SEB. "Momentum is favouring keeping euro-dollar at high levels."

The dollar, meanwhile, was 0.1 percent lower on the day at 102.45 yen though still well off a two-month low of 100.755 yen hit earlier this month.

The rise in home prices in China eased for the first time in 14 months in January, data showed on Monday, raising fresh concerns over the health of an economy that has been a key driver for global growth in recent years.

The Nikkei was down 0.2 percent overnight. The yen and the Nikkei tend to move in opposite directions, with a rally in the index often seen as a signal for speculators to sell the yen and buy higher-yielding currencies, while that trade may be unwound when risk appetite falls.

The yen's strength this year has surprised hedge funds and other investors alike. Many went into this year with bullish bets on the greenback as the U.S. Federal Reserve cut back its bond-buying while the Bank of Japan eased monetary policy further.

"Dollar-yen moves on risk aversion, and when Tokyo stocks are down, dollar/yen is down, even if the reason is a drop-off in activity in its (Japan's) major export market," said Marshall Gittler, head of global FX strategy at IronFX Global.

Gittler pointed to euro zone inflation data for February on Friday as a focus for investors this week.

Group of 20 finance ministers and central bank chiefs agreed at a weekend meeting in Sydney to set a collective gross domestic product (GDP) growth target of 2 percent over the next five years.

Global growth and recent turmoil in emerging markets were in focus at the meeting, but the G20 communique did not hint at significant friction between the advanced and emerging economies.

The dollar index was marginally down at 80.233 after posting its first weekly gain in three weeks last week, largely on minutes from the Federal Reserve's January policy meeting showing that the U.S. central bank's plan to reduce its monthly asset purchases remained intact.

Market participants will be keen to see whether the Fed's tapering commitment offsets any weakness in U.S. economic indicators due this week.

"What was agreed at the G20 meeting, such as setting a 2 percent global growth target, will be forgotten immediately. But tacit approval by other G20 nations for U.S. tapering gives the dollar some support while weighing on emerging currencies," said Yunosuke Ikeda, forex strategist at Nomura Securities.