FOREX-Dollar rallies, bank jitters hit risk appetite

* Euro down; dollar index hits one-month high .DXY

* Europe bank shares tumble, UK bank shake-up stings pound

* FOMC meets; Aussie down on dovish RBA after rate hike

(Adds quotes, updates prices)

By Naomi Tajitsu

LONDON, Nov 3 (Reuters) - The dollar hit a one-month high against a currency basket on Tuesday as investors retreated from risk assets on jitters over banks and braced for central bank meetings in the United States, euro zone and UK.

A 2 percent fall in European share prices on concerns over the banking sector boosted the dollar, which tends to gain when investors shed risk assets. That also helped the yen, which firmed against the euro and dollar.

The euro fell about a full percent on the day, hitting a four-week low of $1.4627 EUR= according to Reuters data and reversing Monday's gains made on firm manufacturing data.

"There's less risk appetite, what with equities lower, so that's supportive for the dollar," said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.

Some attributed losses in banks shares and the euro partly to European Commission estimates of bank losses renewing anxiety over the sector's health.

The EU Commission quoted results of stress tests in the banking sector, published in early October, which said losses could amount to 400 billion euros in 2009-10.

"Although several financial stress indicators are back at pre-crisis levels, the banking sector remains fragile," the Commission said.

Bank shares suffered after disappointing results from UBS (UBSN.VX) and a shake-up of UK banks. The DJ STOXX European bank index .SX7P was down nearly 4 percent.

The euro fell 1.20 percent against the yen EURJPY=R to 131.74 yen while the dollar dropped 0.3 percent against the Japanese unit to 89.88 yen JPY=.

Tokyo markets were closed on Tuesday for a national holiday.

Sterling tumbled to a one-week low against the dollar after the UK Treasury announced a shake-up of British banks, which raised concerns about the financial sector.