* US auto woes, financial-sector fears dull risk appetite
* Dollar, yen up broadly, technically shaky euro slides
* Heavy event risk this week as ECB meeting looms
* Trichet says no decision yet on buying corporate debt
(Updates prices, adds quotes, adds ECB's Trichet comment)
By Steven C. Johnson
NEW YORK, March 30 (Reuters) - The dollar and yen rallied
on Monday as fears of bankruptcy for U.S. automakers General
Motors and Chrysler prompted anxious investors to cut exposure
to risk and seek safety in the U.S. and Japanese currencies.
The euro continued to retreat from last week's two-month
high above $1.37, falling below $1.32 after Spain was forced
to take over a regional savings bank, its first rescue since
the financial crisis began, and Hungary's credit rating was
cut.
That added to selling by those anticipating a cut in euro-
zone interest rates this week and increased the appeal of the
dollar and yen, which tend to rise in times of trouble as
investors repatriate funds from higher-yielding currencies and
relatively riskier assets such as stocks.
"The GM news was unsettling for the market and caused
stocks to suffer globally," said Steven Butler, head of FX
trading at Scotia Capital in Toronto. "Rising risk aversion
makes the dollar look good in the short term."
U.S. stocks swooned after the Obama administration
rejected funding pleas from GM <GM.N> and Chrysler and forced
out GM's CEO, pushing the carmakers closer to possible
bankruptcy.
The White House said it would fund GM only for the next 60
days while it develops a more convincing restructuring plan.
The euro was last down 1.2 percent at $1.3148 <EUR=>. near
a session low of $1.3116, its lowest level since March 18. It
lost 1.5 percent to 128.04 yen <EURJPY=>.
Analysts say $1.31 is the euro's next technical target on
the downside because it marks the 50 percent retracement level
of its March rally from $1.2455 to $1.3737.
Sterling fell 1.1 percent to $1.4165 <GBP=> while the
dollar shed 0.5 percent to 97.40 yen <JPY=>, with risk
aversion and Japan's financial year-end increasing demand for
the yen.
ANXIETY RISES, ECB IN FOCUS
The GM news added to worries stoked over the weekend when
U.S. Treasury Secretary Timothy Geithner said some banks will
need large amounts of assistance -- remarks that BMO Capital
Markets currency analyst Andrew Busch said "put the bull's eye
back on the financial sector."
GFT Forex's Boris Schlossberg said Standard & Poor's move
to cut Hungary's foreign currency rating "rubbed salt in the
wound" for the euro by refocusing attention on recession in
eastern Europe, a region to which euro-zone banks are
exposed.
The European Central Bank is widely expected to cut
interest rates to 1 percent on Thursday. Markets are keen to
see if it will follow U.S., British and Japanese central banks
in buying government or corporate debt to boost the
availability of credit.
ECB President Jean-Claude Trichet said on Monday that no
such decision has yet been made. He also said euro-zone growth
is likely to remain sluggish this year before starting to
rebound in 2010.[]
Dan Cook, a senior market analyst at IG Markets in
Chicago, said the ECB may not be able to resist adopting
unorthodox monetary policy for long, though.
"We still look to dollar strength as Trichet is eventually
forced to move into this type of bond buying," he said.
Commenting on a Chinese proposal to create a global
reserve currency, Trichet pointed to President Barack Obama's
recent remark that there is no need for such a currency and
Geithner's assertion that a strong dollar is in the U.S.
interest.
"These are very, very important statements and I would not
envisage anything else in the present circumstances, which are
extraordinarily touchy," he said. []
(Additional reporting by Nick Olivari; Editing by Jan
Paschal)
