* Obama determines GM bankruptcy is best option -report
* A U.S. official says the report is inaccurate
* Dollar, yen surge but retreat from day's highs
* Yen had fallen to a 1-mth low after BOJ tankan
By Satomi Noguchi
TOKYO, April 1 (Reuters) - The dollar and the yen rose on Wednesday on a report that the White House was prepared to let U.S. automakers go bankrupt, but retreated from the day's highs after a U.S. administration official said it was inaccurate.
Bloomberg reported that U.S. President Barack Obama has determined that a prepackaged bankruptcy is the best way for General Motors Corp, quoting people familiar with the matter.
But a senior U.S. administration official said President Barack Obama's thinking on the crisis facing GM has not changed since Monday, saying the report was "not accurate."
The report spurred risk aversion, prompting investors to dump the euro and other higher-yielding currencies and return to the safety of the greenback.
That also sent the yen broadly higher, a sharp turnaround as the Japanese currency had hit a one-month low versus the dollar after the Bank of Japan's tankan corporate survey showed a dire picture of an economy in recession.
"It is like a repeat of what we saw on Monday when news about the U.S. rejection of automakers' restructuring plans also hit the market in Tokyo hours and pushed dollar/yen down sharply," said a senior currency options trader at a Japanese bank.
"But the impact seems to be smaller this time as there is more optimism in the market that the U.S. economy may be bottoming out," the trader said.
Reduced investor risk appetite sent higher-yielding currencies such as the Australian dollar lower, which was also dented by data showing Australian retail sales fell by the most in nine years, adding to the case for a cut in interest rates next week.
The New Zealand dollar extended a big slide after New Zealand's central bank warned on Wednesday that a recent rise in market interest rates was unwarranted and out of sync with its view of the economy.
The dollar index, a gauge of the greenback's performance against six major currencies, rose 0.3 percent to 85.743, but off an earlier high of 85.940.
The euro was down 0.2 percent to $1.3218, above earlier low of $1.3173.
The dollar fell 0.4 percent from late New York trade to 98.60 yen after tumbling as low as 98.21 yen on trading platform EBS.
The dollar had gained earlier to 99.48 yen, the highest since March 5, after the BOJ's tankan survey showed confidence among Japan's big manufacturers tumbled at its fastest pace ever in the first quarter to the worst on record.
The survey highlighted the pain companies are facing as the global economic crisis scythes through Japan's exports.
The euro fell 0.6 percent to 130.30 yen after falling as low as 129.94 yen from earlier highs near 131.90 yen.
"The report about Chrysler's possible bankruptcy is now impacting the whole market," said a senior trader at a Japanese bank.
"U.S. stock futures are looking terrible after a positive close in New York, prompting market players to dump currencies they had bought against the yen," the trader said.
U.S. stock futures fell 1.3 percent in Asian trade after a rise on Tuesday, while Tokyo shares climbed 1.5 percent with other regional stock markets also gaining.
The Aussie fell 0.3 percent to $0.6888 and dropped to 0.6 percent to 67.95 yen.
The kiwi slid 0.3 percent to $0.5575 and lost 0.7 percent to 54.95 yen. (Editing by Edwina Gibbs)