* Euro, dollar slide vs yen, weak stocks curb risk appetite
* Initial eurphoria from global bank rescue plans wears off
* Focus shifts to impact of bailouts on global economy
(Changes dateline, byline, releads, updates throughout)
By Naomi Tajitsu
LONDON, Oct 15 The euro and the dollar fell
against a broadly stronger yen on Wednesday as the euphoria from
government plans to recapitalise hobbling banks ebbed and focus
turned to how the bailouts would impact the global economy.
Investors flocked to the Japanese currency as part of risk
aversion trades as weak stock prices suggested companies would
continue to struggle through the credit crisis, which has frozen
lending between banks, and in turn, dried up funds available to
firms and consumers.
Governments around the world have announced plans to rescue
their banking sectors, with the United States on Tuesday saying
it would inject $250 billion into its banks, including the
nation's top nine lenders.
Such moves have stemmed sharp falls in currencies like the
dollar, euro and sterling in past weeks as interbank lending
rates have started to creep lower from very high levels.
But in the aftermath of the panic selling of risky
positions, analysts said the increasing possibility of bank
bailouts taking a serious toll on economies around the world may
keep those currencies on the back foot.
"The focus is returning to how much Libor rates will come
down and how this will support sentiment, and the market will
also refocus on fundamentals of where growth is going, the
extent of risks to global growth as well as U.S. growth," said
Divyang Shah, chief strategist at CBA.
The dollar JPY= fell 0.9 percent to 101.26 yen, retreating
further from around 103 yen hit on Tuesday and keeping the pair
within range of 97.88 yen hit according to Reuters data last
week for its first time since mid-March.
The dollar stayed weak after data on Tuesday showed a record
U.S. budget deficit in fiscal 2008 [nN14229603], while Federal
Reserve Bank of San Francisco Janet Yellen said the economy
"appears to be in a recession" [ID:nN14265967].
The euro EURJPY=R fell 1.2 percent to 137.67 yen, as a 2
percent slide in European shares .FTEU3 kept investors keen on
unwinding carry trades, which involve selling the low-yielding
yen for assets in higher-yielding currencies.
The euro EUR= slipped 0.2 percent to $1.3595. Earlier in
the day, it hit a session low of $1.3537 after a German poll on
Tuesday showing weak economic sentiment offered more evidence of
weakness in the euro zone economy.
Traders said extreme fears about the financial crisis
receded after short-term interest rates for dollars eased in
response to the U.S. bank bailout announcement, which followed
similar pledges in Britain, France and Germany.
But the overall state of the market remained fragile, making
prices very volatile.
"Global investors continue to cut risky investments and
prefer to keep them as cash, and that's helping the yen's broad
gains," said Shuichi Kanehira, a senior trader at Mizuho
Corporate Bank in Tokyo.
The Canadian dollar CAD= inched up against the U.S. dollar
after Canadian Prime Minister Stephen Harper was re-elected and
strengthened his minority government on Tuesday [nN13406994].
The U.S. dollar fell as low as C$1.1539 CAD=D4, off a high
of C$1.1688 hit earlier in the day, and down from a three-year
peak of C$1.2135 struck on Friday
"CAD caught a bid tone as a minority win by the
Conservatives was entirely expected, but there had been some
uncertainty as to the extent of that minority victory," RBC
analysts said in a research note.
(Additional reporting by Tokyo Forex Team, editing by Chris