FOREX-U.S. dollar drops vs yen as Wal-Mart, jobless weigh

* U.S. weekly jobless claims, Wal-Mart sales hurt dollar

* Dollar falls vs yen as risk aversion returns

* Stg bounces as BoE delivers 50 bps rate cut, as expected (Recasts, adds quotes, updates prices; changes byline, dateline, previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, Jan 8 (Reuters) - The U.S. dollar tumbled against the yen on Thursday, as falling stocks worldwide and weak sales at U.S. retailer Wal-Mart tempered the market's appetite for risk and reignited worries about the global economic outlook.

The greenback also fell against the euro after the latest weekly data showed the number of Americans remaining on unemployment benefits rose to a 26-year high.

"That bit of optimism that lifted (the dollar) for the first few days faded after the FOMC minutes showed people just how concerned the Fed was about the U.S. economic outlook," said David Watt, senior currency strategist, at RBC Capital Markets in Toronto.

"And the ADP (ADP Employer Services) report (on U.S. private sector jobs) was a cold, hard slap of reality."

The dollar had rallied in the first few days of 2009, buoyed by the expectations for a U.S. stimulus package that many hope would help pull the economy out of recession. However, the optimism proved short-lived as fresh U.S. data, such as the steep drop in private sector jobs, showed that this could be a prolonged slowdown.

Following Wednesday's ADP report, a revised Reuters poll indicated that analysts have revised their forecasts for U.S. non-farm payrolls in December to show job losses of 550,000, from an original estimate of 500,000.

Watt further said many in the market are expecting a recovery in the second half of the year, but that is based on a hope.

"(But) facts indicate there will be challenges ahead. I think this has all started to seep into people's outlook and force them to shake off the New Year's celebration hangovers."

WAL-MART DISAPPOINTS

In early New York trading, the dollar was down 1.5 percent at 91.26 yen JPY=, extending losses after Wal-Mart WM.T, the world's largest retailer, posted weaker-than-expected December sales. It also forecast lower earnings in the fourth quarter, adding that the holiday season was more challenging than expected for retailers. See [ID:nL8478360].

Yen strength pushed the euro down 0.5 percent at 125.55 yen EURJPY=.

The euro traded 0.9 percent higher at $1.3759 after sliding to a session low of $1.3535 earlier, according to Reuters data.

Sterling bounced to three-week highs versus the dollar and euro after the Bank of England met market expectations with a 50-basis point interest rate cut to 1.5 percent.

Analysts said the BoE statement, which expressed concern about the weak pound's impact on the economy's imports, suggested that the central bank may have to slow the pace of its rate cuts

The pound rose as high as $1.5372 GBP=, according to Reuters data. It was last at $1.5282, up 1.1 percent on the day. The euro was down 0.2 percent at 89.99 pence, after hitting a low of 88.81 pence EURGBP=D4, its lowest since mid-December.

"I think it's pretty likely that it was sterling that decided them to slow down the pace of cuts," said Brian Hilliard, an economist at Societe Generale. "I still think there's more (rate cuts) in the pipeline."

Earlier in the session, the euro was weighed down after figures showing an unprecedented 10.6 percent month-on-month fall in German exports in November as global demand for cars and other manufactured products have plummeted due to a worldwide recession. See [ID:nL88871].

A series of weak euro zone economic data further fueled the view that the the region's recession is deepening, which may require aggressive rate cuts by the European Central Bank.

(Additional reporting by Steven C. Johnson in New York and Veronica Brown in London) (Editing by Theodore d'Afflisio)