* Euro/dollar hits one-month low $1.2885 on lower stocks
* Risk aversion boosts dollar, yen
* Traders await UK budget at 1130 GMT
(Adds comment, details, updates prices)
By Naomi Tajitsu
LONDON, April 22 (Reuters) - The euro fell to a one-month low against the dollar, while higher-yielding currencies also came under selling pressure as struggling global shares kept investors keen on dumping currencies considered to be high-risk.
The euro slumped as an early fall in European shares reminded market participants that risk aversion continues to rule the market given a raft of U.S. corporate earnings reports that suggest the global economy remains weak.
"Anyone still betting on a recovery in risk appetite will be disappointed," said Michael Klawitter, senior currency strategist at Dresdner Kleinwort in Frankfurt.
"This is boosting the dollar, and is the backdrop of the fall in yen crosses."
With few major events or data due from the euro zone on Wednesday, analysts said the market would focus on the UK budget at 1130 GMT, which many anticipate will show a grim outlook for Britain's economy and plans to crank up public borrowing.
The euro fell roughly 0.3 percent on the day to as low as $1.2885 on electronic trading platform EBS, its lowest since mid-March, as the single currency was dragged lower by a 0.4 percent slide in European shares.
Against the yen the euro fell 0.8 percent to 126.77 yen. The yen gained broadly, pushing the dollar half a percent lower to 98.18 yen.
Currency markets have been volatile in the past week, jerked around by moves in share markets. However, a broad sense of risk aversion has boosted the dollar and the yen, which are often considered safe bets in times of uncertainty.
The dollar index rose 0.2 percent to 86.670, hovering near a one-month high hit earlier in the week.
"For now the FX market remains willing to push the 'safe haven' currencies, with further gains on the dollar and the yen appearing likely," analysts at Calyon wrote in a research note.
Sterling traded half a percent lower at $1.4600 as traders braced for the government's budget.
The UK currency was under selling pressure before data due at 0830 GMT which are expected to show a rise in the UK unemployment rate in February and a significant deterioration in government borrowing in March.
The high-yielding Australian and New Zealand dollars fell more than 1 percent against the U.S. dollar, while tumbling more than 1.5 percent against the yen.
The yen had been a favourite to sell against commodity currencies such as the Australian dollar as equity markets rose in recent weeks and optimism picked up that the global downturn was bottoming out.
Those short yen positions have been cut since early April due to uncertainty over factors such as the next step in European Central Bank policy and stress tests for U.S. banks, but the market is unsure how far to chase the yen up from here.
The ECB is seen cutting interest rates to 1.0 percent from 1.25 percent in May but it is unclear whether it will follow the Federal Reserve and other central banks and create money via other means such as buying corporate or sovereign debt.
In an editorial published in the Wall Street Journal on Wednesday, ECB Governing Council member Juergen Stark said that the central bank is weighing up possible non-standard measures to help the economy, while keeping in mind the role the banking system plays in the region. Axel Weber, another Governing Council member, told the Financial Times in an interview that the ECB had marginal room for more rate cuts and the euro zone had very limited scope for buying government debt in secondary markets.
The market is awaiting the outcome of the U.S. authorities' stress tests on banks. U.S. officials are expected to release details of the underlying assumptions of the tests on Friday, but actual results are not expected until May 4.
Treasury Secretary Timothy Geithner said most U.S. banks had enough capital to keep lending, but a pile of bad debts was fostering doubts about their health and slowing a recovery.
However, an International Monetary Fund report warned that global write-downs by banks and other financial institutions could reach $4.1 trillion as institutions seek to clean up their balance sheets.
(Reporting by Naomi Tajitsu, editing by Stephen Nisbet)