* Yen rises, dollar dips vs euro on late risk recovery
* Sterling hits near-two month low against dollar
* UK's Darling announces 50 percent bank bonus tax
* Year-end positioning, deficit worries influence moves
(Updates prices, adds Gross comment from Investment Summit)
By Steven C. Johnson
NEW YORK, Dec 9 (Reuters) - The dollar snapped a three-day
advance against the euro on Wednesday as recent worries about
governments' fiscal woes eased, sparking a modest rebound in
demand for higher-yielding currencies and assets.
Sterling edged lower after Britain announced a 50 percent
tax on bank bonuses, while analysts said year-end rebalancing
helped boost the yen despite data showing Japan's economy grew
by less than expected in the third quarter.
But the overall mood remained cautious a day after Fitch
downgraded Greece's credit rating below the single-A bracket
for the first time in 10 years. Also, Standard & Poor's on
Wednesday revised its outlook on Spain -- another euro zone
country with weak finances -- to negative.
"There are some increased concerns about sovereign ratings,
though investors are also using it as an excuse to take profits
and exit some trades by year-end," said Matthew Strauss, senior
strategist at RBC Capital Markets in Toronto.
Some analysts said the euro recovered from Tuesday's near
one-month low against the dollar because markets were already
aware of the fiscal woes of Greece and Spain.
Investors tend to buy the dollar and the yen when risk
aversion rises and sell them when it falls, as these currencies
are often borrowed at low rates to finance risky trades in
other assets.
The euro was changing hands at $1.4731 <EUR=>, up 0.2
percent but off a $1.4782 session peak. It fell 0.4 percent to
129.39 yen <EURJPY=> while the dollar lost 0.6 percent to 87.82
yen <JPY>.
ECB Governing Council member Axel Weber said on Tuesday
there was no need for external financial handouts for Greece.
[]
STERLING STRUGGLES
Strauss said any sign of credit worries from a less obvious
part of the world could spark even greater risk aversion of the
sort seen last month when Dubai's debt troubles came to light.
That would likely lead to a stronger dollar as investors
dump risky assets and take refuge in the U.S. currency.
"The past reputation of the dollar as a safe-haven currency
during periods of distress is something markets will not easily
relinquish," Bill Gross, founder and co-chief investment
officer of Pacific Investment Management Co, told Reuters at
its Investment Outlook Summit.
Sterling fell to $1.6168 <GBP=>, its lowest level since
mid-October before recovering to trade at $1.6268, down 0.1
percent on the day.
British Finance Minister Alistair Darling said the UK
economy will grow by 1 to 1.5 percent in 2010, sticking to the
forecast he made in the April budget.
But he admitted the recession had turned out to be deeper
than he forecast in April. He said he now expected the economy
to shrink 4.75 percent in 2009, instead of the 3.25 to 3.75
percent originally predicted. [] []
He also announced a one-off super tax on bank bonuses and
other higher taxes on the rich. [] The 50 percent
bonus tax starts at payments above 25,000 pounds.
"That (threshold) is not a lot of money," said Joseph
Trevisani, chief market analyst at FX Solutions in Saddle
River, New Jersey, adding that was making investors more
cautious about the pound.
(Additional reporting by Nick Olivari; Editing by Diane
Craft)
