* Yen, dollar buoyed as investors shun risk
* Stg trades below $1.38, not far from 23 year lows hit Weds
* Traders alert to possible currency intervention
* Stock prices gain, euro zone orders down 4.5 pct
(Adds quote, updates prices, changes byline)
By Jessica Mortimer
LONDON, Jan 22 (Reuters) - The yen and the dollar
strengthened on Thursday, buoyed by their perceived safe-haven
status as investors fretted about global economic heath, while
sterling stayed under pressure on banking and economic woes.
European shares gained 0.6 percent <> as they
rebounded from recent losses, but this failed to dent the yen,
which held near a 13-1/2-year peak against the dollar and a
seven-year high versus the euro reached on Wednesday.
Gains in the Japanese currency were limited, however, as
officials kept investors on alert for possible intervention,
while Swiss officials issued similar warnings after recent
strong rises in the Swiss franc.
"We are still in a very elevated risk averse environment,
which is fuelling gains for the yen and the dollar," BTM-UFJ
currency economist Lee Hardman said.
"The risk of yen intervention is increasing, but even if
they (the Japanese authorities) do intervene they won't be able
to reverse the trend, given the deleveraging forces in play," he
said.
The pound remained firmly out of favour meanwhile after
plunging to 23-year lows against the dollar on Wednesday on
worries about the parlous state of the UK banking sector and
government finances.
A grim economic outlook also weighed on the euro, as data
showed euro zone industrial new orders tumbled 4.5 percent in
November from the previous month, a much larger decline than
expected [].
Euro sentiment has been dented by three rating downgrades of
euro zone countries within a week. S&P cut Portugal's sovereign
rating on Wednesday after downgrading Spain and Greece.
By 1235 GMT the dollar was down 0.7 percent at 88.82 yen
<JPY=>, but off Wednesday's low of 87.10 yen, the lowest since
July 1995.
The euro dropped 1 percent to 115.42 yen <EURJPY=R>, falling
back towards the seven-year trough of around 112.08 yen. Against
the dollar, the euro lost 0.3 percent to $1.2996 <EUR=>.
Sterling dropped 1.5 percent to $1.3767 <GBP=>, not too far
from the trough of $1.3620 reached on Wednesday, its lowest
since 1985. The euro also gained 1.2 percent against the
troubled UK currency to 94.40 pence <EURGBP=>.
STERLING PRESSURED
The pound has come under severe pressure this week as a
government rescue package for struggling British banks failed to
reassure investors or stem losses in banking stocks.
There are also major concerns about the deteriorating state
of UK public finances and how the government will fund huge
bailout packages when it is already running a large fiscal
deficit, just as a weakening economy dents tax receipts.
"Sterling still worries me as investors must be asking
themselves what happens after the government has spent all they
have and a great deal of everyone else's money," IDEAglobal
strategist Maurice Pomery said in a note to clients.
A survey on Thursday also highlighted how much trouble the
economy is in, revealing that UK industrial orders tumbled at
their sharpest pace since July 1992 [].
On Wednesday, however, the pound came off its two-decade
lows after France's economy minister, Christine Lagarde, said
the Bank of England should take steps to support sterling.
A G7 source also told Reuters that sterling's slide would be
discussed at the next meeting of the Group of Seven
industrialised countries in February. [].
The comments come as authorities are becoming increasingly
worried about currency volatility.
Japanese authorities repeated their mantra that they were
watching currency moves closely, but refrained from commenting
on yen-selling intervention. []
The Swiss National Bank also said on Wednesday it may use
unlimited foreign exchange intervention to weaken the Swiss
franc and avert deflation []
That pushed the euro and dollar higher against the franc,
with the dollar touching $1.1615 francs <CHF=> on Wednesday, its
highest level since early December.
At 1235 GMT, the dollar gained 0.4 percent to 1.1565 francs.
(Reporting by Jessica Mortimer; Editing by Victoria Main)
