* Dlr falls broadly; driven largely by sterling gains
* G20 meeting seen long on rhetoric, short on specifics
* Risk aversion intact; stock markets on defensive
* Japan slips into recession in Q3
(releads, adds quotes, updates prices)
By Veronica Brown
LONDON, Nov 17 (Reuters) - The dollar fell on Monday, driven largely by a bounce in sterling, but risk-averse positions were seen staying in favour after the weekend G20 meeting failed to yield specific action to restore global market confidence.
The low-yielding yen rose as risk-wary traders picked up the currency, shrugging off data showing Japan joined the euro zone in recession. A weakening global outlook was underlined by U.S. data on Friday showing a record fall in retail sales in October.
Britain will suffer its sharpest economic contraction in almost two decades next year, and unemployment could rise to almost 3 million by 2010, the Confederation of British Industry forecast.
Leaders of 20 leading economies, meeting in Washington over the weekend, agreed on a host of steps to rescue the global economy from the worst financial crisis in 80 years. But they left it to individual governments to tailor their response to their own circumstances and troubled industries.
"If anyone was looking for a silver bullet in the first place on the G20, then they were set up for a disappointment," said Michael Rosborough, senior global currency strategist at Citigroup in London.
"There's not a lot of incentive right now to put on risk. We may see bounces, but the overall environment in terms of risk-taking is not fully stabilised," he added.
By 1135 GMT the dollar was down 0.6 percent on the day at 96.40 yen, while the euro was up slightly at $1.2642.
Dealers said the dollar's turn lower came as sterling bounced sharply from 6-1/2 year lows hit last week. Profit-taking on the dollar took sterling up more than 1.2 percent on the day to session highs above $1.49.
Sterling also managed to outperform against the euro, with the single currency last down roughly 1 percent at 84.85 pence.
Traders and analysts were sceptical however on the pound against a backdrop of worsening British economic conditions.
While the euro squeezed out gains against the dollar, risk-wary investors kept it pressured with euro/yen down 0.8 percent at 121.90 yen.
RISK AVERSION INTACT
European share prices reflected the overall risk averse atmosphere, with the FTSEurofirst 300 Index extending early losses to stand down 2.2 percent.
Japan's Nikkei share average rose 0.7 percent, despite data showing Japan slid into recession in the third quarter along with the euro zone..
Analysts said the overall preference for unwinding riskier FX positions, favouring the low-yielding dollar and yen, would stay in focus as investors concentrated on prospects for a prolonged global recession.
"We see little reason for de-leveraging as a key theme in global markets to abate and we continue to look for further yen and dollar strength over the coming 1-3 months, at the expense of the high yielding currencies and the euro," UBS strategists said in a note to clients.
The Australian dollar initially sank more than 1.5 percent to US$0.6363 earlier in the global session, but then jumped quickly towards $0.65.
Dealers suspected the Reserve Bank of Australia was intervening in the market in Asian trade, but the central bank would not confirm it had acted. The Aussie was last steady on the day.
The RBA intervened on at least two occasions last week, buying the Aussie around $0.6350 when the market was disorderly and lacking liquidity.
(Reporting by Veronica Brown; Editing by Ruth Pitchford)