* Yen falls 0.8 percent vs euro, declines broadly
* European plans to recapitalise banks soothe investor jitters
* U.S. plans to inject $250 billion into banks -sources
* Underlying worries about weakening global economy persist
By Masayuki Kitano
TOKYO, Oct 14 (Reuters) - The yen fell 0.8 percent against
the euro on Tuesday after European governments unveiled steps to
shore up their banking systems, raising hopes for an easing of
the credit crisis.
Britain, Germany and France announced plans on Monday to
recapitalise their banking systems, helping rekindle risk
appetite and triggering selling of the low-yielding yen, which
rallied last week as investors dumped risky carry trades.
"The yen had been bought due to risk aversion, but such moves
are likely to subside for now," said Hiroshi Yoshida, a currency
trader at Shinkin Central Bank.
More help for banks was on the way, with the United States
poised to announce similar steps to bolster banks' capital.
The United States aims to inject $250 billion into U.S. banks
in a new bid to calm rattled markets, with about half going to
the country's top nine institutions, people familiar with the
plan said on Monday. []
Japan's finance ministry unveiled a series of steps on
Tuesday aimed at stabilising financial markets, including
enacting a law enabling public fund injections into regional
banks. []
The euro rose 0.8 percent against the yen compared to late
U.S. trading on Monday, and stood at 139.70 yen after going as
high as 141.00 yen<EURJPY=R>, having rebounded off a three-year
low of 132.15 yen hit on trading platform EBS on Friday.
High-yielding currencies such as the Australian and New
Zealand dollars also rose against the yen <AUDJPY=R> <NZDJPY=R>.
Due to Japan's low interest rates, the yen has often been
used to fund carry trades, in which investors sell low-yielding
currencies to invest in higher-yielding currencies and assets.
Such selling of the yen often gains steam when investors'
risk appetite recovers.
"The yen is likely to come under selling pressure and to be
pushed back," said Masaki Fukui, a senior market economist for
Mizuho Corporate Bank.
But there were doubts about how long the rebound in
higher-yielding currencies against the yen would last given
worries about the worsening outlook for the global economy.
"These are steps taken to tackle the crisis in the financial
sector, but the issues at the root have not changed," said a
trader for a major Japanese bank, referring to worries about the
global economy.
In addition, banks may remain cautious about taking on credit
risks and lending out money, particularly to hedge funds, said
Shinkin Central Bank's Yoshida.
Wild market swings and the yen's rapid appreciation have
forced Japanese retail investors, once a force to be reckoned
with in the high-yielding markets, to curb positions in cross yen
pairs.
According to data from the Tokyo Financial Exchange, one of
the main intermediaries in Japan's margin trading market, margin
traders at the exchange have slashed their long positions in all
cross yen pairs down to a 16-month low.
Against the dollar, the euro gained 0.5 percent to $1.3664
<EUR=>. The dollar inched up 0.2 percent from late New York to
102.22 yen <JPY=>, having come off a six-month low of 97.91 yen
hit on Friday.
(Additional reporting by Shinji Kitamura, Eric Burroughs and
Shinichi Saoshiro; Editing by Michael Watson)
