* Euro falls broadly, traders takes profits on steep rally
* Dollar stays weak vs yen on grim US economic view
* Limited fx impact from BOJ rate cut to 0.1 percent
(Changes dateline, byline, adds comment, updates throughout; previous TOKYO)
By Naomi Tajitsu
LONDON, Dec 19 (Reuters) - The euro fell broadly on Friday, as traders locked in profits from the currency's rally to a 2 1/2-month high against the dollar and its strongest level ever against sterling. The dollar fell closer to a 13-year low against the yen, reversing brief gains made after the Bank of Japan cut interest rates, as a dismal U.S. economic outlook continued to sting the currency.
The euro fell suddenly in early London trade, as traders reckoned that its broad surge this week may have been overdone. The single currency is on track to post a weekly gain of more than 5 percent against the dollar, its biggest since the euro was launched in 1999.
"The move up in the euro has been quite dramatic this week, so some people may be taking profits," said Phyllis Papadavid, currency strategist at Societe Generale in London.
"We've seen a lot of volatility in the market in the past few days so people are in some sense keeping risk light and taking positions which are shorter-term."
Some in the market said that euro losses were part of a delayed reaction to the European Central Bank's move on Thursday to cut the return it gives banks for holding cash at the ECB and prod interbank money markets back to normality.
By 0950 GMT, the euro had fallen around 1.1 percent to $1.4131, according to Reuters data, dropping nearly 3 cents from a session high of $1.4309.
The single currency retreated from $1.4720 touched on electronic trading platform EBS on Thursday, its strongest since late September.
Euro losses were broad, pushing the single currency down 2.5 percent to 124.45 yen and away from 131.03 yen hit on Thursday, its highest in nearly two months.
Against sterling, it fell 1.2 percent to 93.78 pence, retreating from a record high of 95.56 pence hit according to Reuters data on Thursday.
The dollar fell as much as around 0.8 percent to 88.62 yen, sliding within range of 87.13 yen reached on electronic trading platform EBS earlier in the week, for the first time since mid-1995.
The yen was broadly supported as ongoing concerns about the global economy prompted more investors to dump risky positions including carry trades, where the low-yielding Japanese currency in past years was used to buy assets in higher-yielding currencies.
GRIM US OUTLOOK
A decision by the Bank of Japan to cut rates to 0.1 percent on Friday had provided a brief boost to the dollar as the monetary easing took the policy target rates of Japan and the U.S. to more or less equal footing.
But the dollar quickly reversed those gains as the BOJ's move to put more funds into the market to ease the credit crunch was seen as positive for Japan's economy, boosting the yen.
In addition, the possibility of a delay by the U.S. government on whether to bail out the country's comatose automakers and a fall in oil prices to their lowest in more than four years kept the U.S. currency under selling pressure.
Bridge loans to carry the companies for several months could be announced as early as Friday, according sources not authorised to publically discuss negotiations on the issue.
The possibility that the firms could fail could have a deep, negative impact on the wider economy stung the dollar, while a fall in oil prices to their lowest in more than four years also illustrated shrinking demand as a global recession takes hold.
"The automakers' issue is a problem for the entire U.S. economy ... and the fall in oil prices is part of a global economic story because of demand issues, and that's dragging on the dollar," said James Hughes, markets analyst at CMC Markets in London.
(Editing by Victoria Main)