* Yen hits 7-week highs vs dollar and euro as equities fall
* Dollar up vs Aussie, stg, steady vs euro
* German industrial production much better than forecast
* G8 draft statement doesn't mention FX; Q2 earnings eyed
(Adds quotes, updates prices; changes byline)
By Jessica Mortimer
LONDON, July 8 (Reuters) - The yen climbed broadly on
Wednesday as the recent optimism on the global economy continued
to dissipate, prompting investors to shun perceived riskier
assets as stock markets fell.
The dollar also gained against currencies such as the
Australian dollar and sterling, which typically fall in times of
heightened risk aversion.
The euro was steady against the greenback, however, edging
periodically into positive territory after data showed German
industrial output rose by 3.7 percent during May, more than
forecast and the strongest gain since August 1993
[].
Concerns in the wake of grim U.S. jobs data last week that
the recent optimism on the global economy had been overdone,
combined with caution before the start of the U.S. second
quarter earnings season and a Group of Eight summit, kept
investors in risk averse mode, however.
This pushed European stocks to their weakest levels in 10
weeks <> and helped the yen to its strongest in nearly
seven weeks against the dollar and the euro.
"Stocks have weakened and higher risk currencies have been
easing back, particularly against the yen," Standard Bank head
of G10 currency research Steve Barrow said.
"But the increase in risk aversion is fairly modest and I
see it as just a temporary correction as markets take out some
of the optimism that had been priced in recently," he said.
The euro fell to 130.43 yen, its lowest since May 22. By
1147 GMT, it was down 0.6 percent at 131.21 yen <EURJPY=R>.
The dollar lost 0.6 percent to 94.33 yen <JPY=>, having also
hit its lowest since May 22 at 94.09 yen <JPY=>, according to
Reuters data.
The euro was steady against the dollar at $1.3910 <EUR=>,
having briefly risen to a session high of $1.3938 following the
better-than-expected German data. The dollar index was also
steady at 80.713 <.DXY>.
EARNINGS, G8 EYED
Recovery doubts have helped pull currencies such as the
Australian dollar, sterling and the euro well off peaks hit in
June, and the dollar and yen have risen in the past few weeks.
"There is very little clarity on the global outlook, and
there is uncertainty over the earnings season," said Lee
Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
The second quarter U.S. earnings season kicks off with
results from Alcoa Inc <AA.N> later in the day.
Investors are also wary ahead of a summit of leaders of the
G8 economic powers in Italy, who meet later on Wednesday and on
Thursday, where they will be watching for any comment in the
debate on the dollar's role as the world's reserve currency.
Draft statements for G8 leaders and G8 leaders plus G5
emerging market economies, however, made no direct reference to
foreign exchange, though they highlighted "significant risks"
facing the world economy, texts seen by Reuters showed.
[].
The Australian dollar fell by 0.5 percent to $0.7854 <AUD=>
and hit a six-week low against the yen <AUDJPY=R>, shrugging off
data earlier on Wednesday showing a surge in Australian consumer
confidence.
Sterling also hit a one-month low against the dollar <GBP=>,
continuing to fall following weak UK industrial production data
on Tuesday and on concerns the Bank of England may expand asset
purchases under its quantitative easing programme.
Traders and analysts said the current phase of risk aversion
is unlikely to last, however.
Analysts noted net short-yen positions have surged to levels
seen before the collapse of Lehman Brothers last September,
indicating cross yen pairs may see a pick-up after the current
correction.
(Additional reporting by Tamawa Desai in London; editing by
Chris Pizzey)
