* Euro falls broadly after Fitch downgrades Russia
* Rally in dlr, yen back on track; risk-trade fades
* Aussie dollar selling drags yen crosses lower
* Jitters set in ahead of ECB, BoE and U.S. jobs data
(adds quotes, updates prices)
By Veronica Brown
LONDON, Feb 4 (Reuters) - The euro stumbled on Wednesday after ratings agency Fitch downgraded Russia's long-term foreign and local currency ratings to 'BBB', while the dollar and yen picked up steam as investors called time on brighter sentiment.
Fitch said its downgrade reflected the negative impact on Russia from a fall in commodity prices and the dislocation to global markets which has left it floundering to refinance external debt.
Currency strategists said the move was proving negative for the single currency, with more outflows from Russia seen putting more pressure on the rouble and forcing Russian authorities to sell euros to maintain the balance of its reserves portfolio.
"The Russian central bank is obviously being very active in the management of its currency within the basket," said Ian Stannard, senior FX strategist at BNP Paribas in London.
"This increases the likelihood that the tentative rebound seen in recent days in the euro is coming to an end," he added.
The euro extended early losses to hit a session low against the dollar at $1.2840, according to Reuters data, while it also dropped to a low of 114.37 yen, down about 1.7 percent on the day.
In the wider market, a re-think of a braver approach to risk came through early in London trade via heavy selling of the perceived higher-risk Australian dollar versus the yen.
That dragged other yen crosses down, with traders citing large volume options-related activity.
Adding to the Australian unit's woes, a government timetable to speed cash payments from a $27 billion stimulus package was thrown into doubt on Wednesday with a hostile parliament threatening to delay economic stimulus measures.
Analysts said stimulus packages from the United States, Japan and Australia plus slightly more robust U.S. pending homes sales figures had provided a boost to market sentiment.
But that did not make a significant dent in overriding concerns about the banking system and global economy.
"I think Europe was slightly surprised by the Asian reaction overnight to all of this. The U.S. pending home sales were perhaps a turning point but it felt like a knee-jerk reaction to the numbers," said Daragh Maher, deputy head of global foreign exchange research at Calyon in London.
The dollar index, which tracks the U.S. unit against a basket of currencies, was up 0.9 percent on the day at 85.809 after falling more than 1 percent on Tuesday.
The Australian dollar shed 2.5 percent against the U.S. dollar to $0.6360, fuelled largely by falls in the Aussie versus the yen. It was last quoted at 56.68 yen, down around 2.5 percent on the day.
Data released earlier showed deterioration in the euro zone's dominant services sector slowed slightly in January , but separate numbers showed euro zone retail sales fell more than expected year-on-year in December.
INVESTORS BRACED
Analysts said investors were positioning for a number of risk events this week including U.S. labour market figures and interest rate decisions from the European Central Bank (ECB) and the Bank of England (BoE).
Prior to non-farm payrolls data on Friday, a survey of U.S. private sector employment is expected at 1315 GMT. The ADP report is seen showing that 530,000 jobs were shed in January.
The ECB is widely expected to take a break in its rate cutting cycle, with fresh easing expected next month.
"Our economists still expect the next policy rate cut to come in March but dropping inflation data and the worsening economy raise the possibility of a cut in February," UBS strategists said in a note to clients.
"At the very least, though, the latest data should cause a heated debate among the Governing Council," they added.
The Bank of England's interest rate verdict is also scheduled for Thursday, and the central bank is expected to cut interest rates by a half percentage point to 1.0 percent to mark a new historic low, according to a Reuters poll.
(Reporting by Veronica Brown; Editing by Andy Bruce/Victoria Main)