* Dollar down 0.3 pct vs yen at 90.10 yen <JPY=>
* Obama bank plan hurts risk sentiment
* Euro on track for 1.5 pct fall vs dollar on week
* Aussie weighed by China tightening speculation, tax plans
(Recasts, adds quotes, updates prices)
By Tamawa Desai
LONDON, Jan 22 (Reuters) - The dollar edged lower while the
yen gained on Friday as investors pared back riskier trades as
global stocks fell after U.S. President Barack Obama announced
plans the previous day to limit risky trading by U.S. banks.
The U.S. currency usually benefits from risk aversion, but
the plan posed a downside risk for U.S. bank profits and the
economy, weighing on the dollar.
But analysts debated whether a one-way sell-off in the
dollar would continue.
"Although the impact of Obama's proposed banking regulation
changes is clear enough on equities, currency markets seem to
see the implications as ambiguous," said Adam Cole, global head
of fx strategy at RBC Capital Markets.
"A sharp fall in dollar/yen was the most notable movement
and as one of the few trades that is simultaneously short risk
and short dollar, further weakness would be our favoured way of
playing downside equity risk," he added.
The dollar hit a five-week low of 89.78 yen, according to
electronic trading platform EBS. By 1216 GMT, it was at 90.10
yen <JPY=>, down 0.3 percent on the day.
The yen continued to benefit as investors unwound risk.
The euro hit a 9-month low against the yen of 126.55 yen.
But further falls were limited as the pair held key chart
support of 127 yen, traders said.
Obama's proposals, which require congressional approval,
would prevent banks or financial institutions that own banks
from investing in, owning or sponsoring a hedge fund or private
equity fund. []
The rules would also bar institutions from proprietary
trading operations, unrelated to serving customers, for their
own profit.
The dollar index, which tracks the performance of the
greenback versus a basket of six other major currencies, was
down 0.1 percent at 78.249 <.DXY>.
TRIPLE WHAMMY
Obama's proposals were just the latest setback in a market
hampered by fiscal concerns in euro zone peripheral economies
and by speculation China would take more steps to withdraw
liquidity to stem inflation.
Concerns about the fiscal situation in Greece and other
smaller euro zone countries pushed the euro to a 6-month low
against the dollar <EUR=> this week.
The euro was up 0.2 percent at $1.4130 <EUR=> but still on
track for a 1.5 percent decline for the week.
"Taken together the three issues add considerably to
uncertainty about prospects for the global recovery, with the
possibility of a serious restriction of Chinese credit the most
important factor," Barclays analysts said in a note.
Any signs of further tightening in China is considered bad
for commodity-linked currencies like the Australian dollar.
China is Australia's biggest trading partner.
The Australian dollar was on track to fall 1.8 percent on
the week <AUD=>.
Analysts said the Aussie would also be hampered on a play by
the Australian government to lift taxes on mining companies,
which have been making bumper profits from surging metals and
coal prices [].
(Additional reporting by Jessica Mortimer)
