* Yen rises vs dollar, but dips vs euro, Aussie, kiwi
* Limited impact from worse-than-expected BOJ tankan
* Focus on fate of U.S. automakers, share prices
* Fed rate cut prospect weighs down on dollar vs euro
By Masayuki Kitano
TOKYO, Dec 15 (Reuters) - The yen rose against the dollar on
Monday, but stayed well below 13-year highs hit last week as a
rally in Asian shares pointed to some recovery in risk appetite
and curbed demand for the yen.
The yen rallied on Friday to as high as 88.10 yen per dollar
on trading platform EBS, its highest since 1995, after the U.S.
Senate rejected a rescue plan for U.S. automakers.
The Senate decision pummelled stock markets, stoked worries
about a decline in risk appetite and gave a boost to the yen on
Friday.
But the yen later fell back, partly because market players
became mindful of risks that Japanese authorities could intervene
to curb sharp rises in the yen.
The yen initially edged higher against the dollar on Monday,
but pared its gains as Tokyo shares rallied <> after relief
over a possible lifeline for the struggling U.S. auto industry
lifted Wall Street.
"Share prices are all positive, starting with Australian
shares," said a trader for a European bank.
Equities are regarded as a barometer of investors' appetite
for risky carry trades, in which investors sell low-yielding
currencies like the yen to invest in higher-yielding currencies
and assets.
The dollar dipped 0.3 percent against the yen to 90.88 yen
<JPY=>, but was up from an intraday low of 90.49 yen hit earlier
on trading platform EBS.
Higher-yielding currencies rose against the yen, with the
euro rising 0.5 percent to 122.50 yen <EURJPY=R>, and the
Australian and New Zealand dollars rising against the yen as well
<AUDJPY=R> <NZDJPY=R>.
Investors remained cautious about the impact of crumbling
U.S. automakers on the wider economy, weighing down on the
dollar, traders said.
The White House said on Friday it was considering tapping a
$700 billion financial industry bailout fund to prevent a
collapse of ailing U.S. automakers. []
But U.S. President George W. Bush said on Monday an
announcement on a auto industry rescue was not imminent, leaving
the industry's fate clouded in uncertainty for a little longer.
[]
Against the dollar, the single European currency rose 0.8
percent to $1.3478 <EUR=> after hitting two-month highs of
$1.3497 earlier.
Market players said the euro was drawing support in the wake
of recent comments by European Central Bank policymakers that
have cast some doubt on how soon and how aggressively the ECB may
cut rates.
European Central Bank Governing Council member Yves Mersch
said on Friday the bank still had some room to cut interest rates
but needed to use its main weapon against the recession
wisely.[]
"With some market projections pointing to a rate cut of up to
0.75 percentage points by the Fed, the market is also focusing on
quantitative easing," said Yuji Saito, head of the foreign
exchange sales department at Societe Generale.
"Interest rate differentials between the U.S. and the euro
zone are likely to widen as expectations for bold rate cuts in
the euro area have been scaled down," he added.
The Federal Reserve is widely expected to cut rates at least
a half-percentage point to 0.5 percent from 1 percent on Tuesday
at the conclusion of its two-day policy meeting.
DOLLAR AND THE YEN
Analysts said there was still a risk of the dollar falling
below Friday's 13-year low against the yen later this month.
"There are still a lot of yen carry trades out there, and
there might be some kind of negative event that causes them to be
unwound," said Toru Umemoto, chief foreign exchange strategist
for Japan at Barclays Capital.
Masafumi Yamamoto, head of foreign exchange strategy for
Japan at the Royal Bank of Scotland, also said the dollar could
fall further against the yen.
"Volatility is high and there are not any particular buyers
(of dollars). If some kind of negative factor emerges, there
could be a fall to below 88 yen," Yamamoto said.
One factor that could temper any rise is the risk that
Japanese authorities may intervene in currency markets by selling
the yen.
A trader for a Japanese trust bank said it would not be
surprising to see such intervention at levels of 90 yen or below
for the dollar.
But Umemoto at Barclays Capital said he was surprised to see
market players so worried about a possible intervention.
"At a time when the 'Big Three' are near collapse, I doubt
that intervention, which could protect the Japanese car industry,
can be conducted," Umemoto said.
Market players said there was limited currency reaction to
the Bank of Japan's tankan business sentiment survey.
The headline index for big manufacturers' sentiment fell to a
nearly seven-year low of minus 24, down from minus 3 in the
previous survey in September and just below economists' median
forecast of minus 23. []
(Additional reporting by Kaori Kaneko)
