* 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 (Reuters) - 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 Pizzey