FOREX-Euro slips as eurozone fiscal woes fester

* Euro hovers near 8-½ mth lows vs USD, 1-yr low vs yen

* Investors sceptical of G7 assurance on Greece

* Yen broadly higher, near 7-mth peak vs Aussie dollar

By Masayuki Kitano

TOKYO, Feb 8 (Reuters) - The euro and growth-linked currencies were on slippery ground on Monday as risk appetite was subdued on the back of mounting fiscal worries in the eurozone and lingering concerns about a global tax on banks.

Traders said investors were sceptical of the Group of Seven's reassurance on Greece and every move up by the euro EUR= was being used as a selling opportunity.

At the weekend G7 meeting of finance ministers and central bank governors, no new statement on currencies was issued, but support was rising for a levy on banks that could pay for global governments' rescue of the financial system. [ID:nN06131269].

Last month U.S. President, Barack Obama spooked financial markets when he proposed tough reforms for the banking sector.

In addition, while U.S. jobs data on Friday underscored a continued improvement in the labour market, it did not pack enough punch to give a strong boost to risk appetite, keeping growth-linked currencies on the defensive against the yen. [ID:nN04115255]

"Market players think the yen might weaken in the longer term, but that trend has not taken hold yet," said Akira Hoshino, chief manager at Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department.

"We will not see that kind of market unless market players start taking on risk and building up their positions," he said.

The euro fell 0.3 percent from late U.S. trading on Friday to $1.3636 EUR=, edging back towards an 8-½ month low of $1.3585 hit on trading platform EBS on Friday.

It lost more than 1 percent last week, its fourth consecutive week of losses.

The single European currency has shed around 10 percent from a 15-month high of $1.5145 hit in late November, as jitters about the fiscal problems in Greece spreading to Portugal and then to Spain intensified.

The euro fell 0.3 percent against the yen to 121.74 yen EURJPY=R, after dropping to 120.70 yen on Friday, its lowest in about a year.

"It may be profit-taking more than risk aversion but the euro looks heavy and it does not seem as if its fall against the dollar will stop," said Koji Fukaya, senior currency strategist at Deutsche Securities, adding that the euro could eventually fall towards $1.30.

YEN EDGES HIGHER

The yen was broadly higher and hovered near a 10-month peak against sterling GBPJPY=R and its highest in nearly seven months against the Australian dollar AUDJPY=R. The yen rose to those highs last week.

"The risk aversion emanating from Greece, China tightening fears, renewed concerns about the performance of financial stocks, and Obama's banking plan is taking a life of its own, and the fragility of the recovery is now a market millstone," said David Watt, senior currency strategist at RBC Capital.

Investors tend to buy the yen and dollar in times of heightened risk aversion as they unwind leveraged carry trades financed by borrowing in both these currencies.

The dollar index .DXY, was steady at 80.453, not far from a high of 80.683, its strongest since July 2009.

Market players reckon that the yen could weaken later this year given the possibility that the Bank of Japan may take further steps to ease monetary policy to support an economy caught in deflation, or at the very least keep interest rates near zero.

Such an outlook contrasts with market expectations that the U.S. Federal Reserve may raise interest rates later this year. [ID:nNYS007753]

In a recent interview, Japan's Dai-ichi Mutual Life Insurance Co said the biggest investment risk this year would be a rise in U.S. interest rates, adding that it expects the dollar to climb to 105 yen by the end of 2010. [ID:nTKF106834]

The dollar dipped 0.1 percent against the yen to 89.28 yen JPY=.

In the near-term, however, the yen may get a lift from the ongoing concerns about sovereign risk in the euro zone as well as the possibility of fund repatriation into the yen by Japanese corporates and investors ahead of their end-March book closings, said Hoshino at Bank of Tokyo-Mitsubishi UFJ.

Signs of a pick-up in Japanese firms' overseas sales this year may mean that companies have more money that they will want to bring back home, or more foreign currency exposure to hedge, Hoshino continued. (Additional reporting by Anirban Nag in Sydney; Editing by Joseph Radford)