* Dollar at near 4-mth high vs yen, vaults 99 mark <JPY=>
* Dlr index hits fresh 3-year high, euro/dlr at 3-mth low
* Australian economy contracts for first time in 8 years
* BOJ policymaker concerned on stock market tumble, downturn
(adds quotes, updates prices)
By Veronica Brown
LONDON, March 4 (Reuters) - The dollar surged on Wednesday, closing in on 100 yen, as contracting Australian growth and concern about Japan's economy heightened global financial stress, drawing investors to the highly liquid U.S. unit.
Broad dollar gains shook the euro to its lowest in more than three months, while yen weakness was amplified by the arrest of a close aide to Japan's opposition leader in a fund-raising scandal that further clouded the political picture.
Figures released earlier showed Australia's economy unexpectedly contracted last quarter for the first time in eight years, sending the Australian dollar tumbling and taking the euro with it. [ID:nSYD382924]
Bank of Japan board member Miyako Suda said on Wednesday it was hard to say whether the economy had hit bottom and voiced concerns on tumbling share prices. [nT357859]
"The markets have a view that Asia is going to perform just as badly maybe as Europe and the U.S. this year and there's a view that dollar/Asia en-masse should go higher," said Chris Turner, head of FX research at ING in London.
On the stimulus front, China will increase spending in areas such as infrastructure and manufacturing on top of the 4 trillion yuan ($584.7 billion) stimulus package unveiled in November, a senior economic planning official said.
By 1022 GMT, the dollar was up 1.1 percent on the day at 99.40 yen, having earlier hit 99.48 -- its highest since early November -- according to Reuters data <JPY=>.
The euro <EUR=> fell as far as $1.2457 on trading platform EBS to its lowest in more than three months. It was last down 0.3 percent at $1.2521 yen. Data showed the euro zone's service sector was still in decline in February, with services PMI hitting a record low. [nL462612]
The dollar index .DXY hit a three-year peak at 89.624, fast approaching 89.90, which would mark a 38.2 percent technical retracement of its long-term decline from 2001 to 2008. The Australian dollar <AUD=> tested its lowest levels in more than a month at $0.6285.
Traders said the euro also drew fire ahead of Thursday's meeting of the European Central Bank, which is expected to cut interest rates to a record low of 1.5 percent from 2.0 percent.
ECB Governing Council members Axel Weber and Christian Noyer said on Tuesday the central bank was considering all options to extend its monetary toolbox further. [ID:nL3433144]
The yen pared the steepest of its losses after opposition Democratic Party leader Ichiro Ozawa said he would not resign over the arrest of a close aide in a fundraising scandal.
But the affair cast a cloud over his party's prospects in an election that must be held by October.
Analysts are concerned the scandal dims hopes that a national poll could break a parliamentary deadlock and policy paralysis. [ID:nT328584]
The yen has already lost favour after Japan's finance minister resigned last month and as the economy, which many had once expected would weather the global economic storm quite well, struggles with a collapse in export markets and mass lay-offs.
"We expect dollar-yen to trade even higher over the next several weeks, reflecting a powerful shift in market positioning of what was previously seen as a reliable macro hedge to deleveraging," Credit Suisse said in a note to clients.
Investors were also looking to U.S. economic data due later in the day including a monthly private employment survey, which could set a tone for the government's non-farm payrolls data on Friday.
Economists expect the ADP national employment index due at 1315 GMT to show a loss of 610,000 jobs in February. (Reporting by Veronica Brown; Editing by Toby Chopra)