* Euro hits session low of $1.3848
* Euro sold on uncertainty before ECB 1-yr refi operation
* German June Ifo business climate index at 85.9
* Market wary before Fed meeting, U.S. debt auctions
(Adds quote, updates prices)
By Tamawa Desai
LONDON, June 22 (Reuters) - The euro slipped against the dollar and yen on Monday, and higher-yielding and commodity-linked currencies also fell on investor concern about global growth prospects.
The euro came under pressure as the market awaited the European Central Bank's first ever one-year refinancing operation on Wednesday aimed at getting banks lending again and reducing the cost of borrowing for banks, firms and consumers.
"If short-term rates in the euro zone are going to be volatile, then people will want to stay away from the euro," said Geoffrey Yu, currency strategist at UBS.
The euro remained under pressure even after data showed a stronger-than-expected reading in German business sentiment.
Data on Monday showed German Ifo business climate index rose to 85.9 in June from 84.3 the previous month, beating forecasts of 85.2. The current conditions index was at 82.4, versus a forecast of 83.1.
"The worst should be over but the ongoing improvement is likely to be too weak to seriously discuss a recovery," said Carsten Brzeski, economist at ING Financial Markets.
By 0847 GMT, the euro was down 0.5 percent at $1.3858 after hitting a session low of $1.3848, according to Reuters data. It was down 0.9 percent at 132.87 yen.
Traders also cited a Wall Street Journal article about Germany's widening budget shortfall as an excuse to sell euros, while renewed concerns about the banking sector in the euro zone also weighed on the single currency.
Meanwhile, ECB Governing Council member Ewald Nowotny was quoted on Monday as saying the central bank was likely to keep interest rates on hold for the rest of this year.
"If the economy is developing in the way that we expect, I do not see a perspective for this year and we will need to look again next year," he told news agency Bloomberg.
Such a view confirmed market expectations after the ECB kept interest rates at a record low 1 percent earlier this month.
Markets have drifted in the past few days as investors are still trying to decide if a three-month rally in riskier assets, including shares, has outrun the pace at which the global economy is healing.
The Australian dollar fell 1.0 percent to $0.7978 while it fell 1.3 percent against the yen to 76.50 yen.
The New Zealand dollar fell 0.9 percent to $0.6363.
News that ratings firm Moody's had warned California it faced a "multi-notch" downgrade in its credit rating if it failed to act quickly to produce a budget had also fuelled investor unwillingness to hold riskier positions, one trader said.
The dollar was down 0.3 percent at 95.91 yen, after falling to around 95.80 yen earlier.
The U.S. Federal Reserve's policy-setting Open Market Committee meets on Tuesday and Wednesday and the market is expecting the central bank to give a slightly brighter economic view while watching whether it will address a recent rise in Treasury debt yields, and its debt buyback programme.
Markets will also keep an eye on a record $104 billion in U.S. Treasury debt to be auctioned this week. (Editing by Andy Bruce)