* Euro hits one-month high vs dollar
* Euro underpinned by prospect of Fed rate cut next week
* Focus stays on fate of U.S. automaker bailout
By Masayuki Kitano
TOKYO, Dec 11 (Reuters) - The euro hit a one-month high against the dollar on Thursday and the yen dipped against higher-yielding currencies amid some recent signs of resilience and stability in financial markets.
"The rally we are seeing in the euro is related to a number of reasons -- relatively calm markets, collapsing volatility and investors keen to exit some of their short positions ahead of the Christmas holidays," said Sharada Selvanathan, currency strategist at BNP Paribas in Hong Kong.
Traders said the euro's gains picked up steam in thin trade after some stop-loss orders were triggered above the previous day's highs. The euro also drew support from market expectations for the U.S. Federal Reserve to lower interest rates at a policy meeting next week, market players said.
The euro rose to $1.3160 on trading platform EBS, the highest since late October and rising around 1 percent on the day.
The euro also rose 0.9 percent against the yen to 121.60.
The dollar fell broadly, slipping against currencies such as the New Zealand dollar and sterling, which rose 1.3 percent to $1.4972.
The currency market reacted little to the approval of a $14 billion auto industry bailout plan by the U.S. House of Representatives.
While the House stuck to its plan, uncertainty reigns in the Senate, where a razor-thin Democratic majority cannot ensure passage. A vote could come as early as Thursday, but some Republicans have vowed to slow or even block the legislation.
A trader for a Japanese trust bank said dollar demand related to fund repatriation may be subsiding, adding that this may be leading to short-covering in currencies other than the dollar. (Additional reporting by Eric Burroughs in Hong Kong and Kaori Kaneko; editing by Sophie Hardach)