FOREX-Euro slides, hurt by banking and economic worries

* Euro takes a hit as Europe banking concerns rekindled

* Widening spreads for peripherals also pushes down euro

* Yen, Swiss franc rally on growing risk aversion

* German orders fall adds to euro woes

(Adds fresh comment, updates prices)

By Anirban Nag

LONDON, Sept 7 (Reuters) - The euro fell broadly on Tuesday after rekindled concerns about the European banking sector and prospects of slowing growth in the euro zone prompted investors to sell higher-risk currencies.

The yen and the Swiss franc, seen as safe havens, rallied after a Wall Street Journal report highlighting the shortcomings of European bank stress tests in July spurred risk aversion.

A fall in German manufacturing orders in July added to the single currency's woes. [ID:nBAF004244].

The WSJ report came after Germany's banking association said on Monday the country's 10 biggest banks may need 105 billion euros of additional capital under revamped rules. [ID:nLDE6850Q9]

Worries about the banking sector also saw yield spreads between peripheral euro zone government bonds and their German counterparts -- considered the safest in the euro zone -- widen, with Portuguese and Irish spreads in focus. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graphic on the euro and euro zone bond yield spreads:

http://r.reuters.com/bev79n ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

The cost of insuring those countries' debt against default also rose, further chilling demand for the single currency.

"Confidence in the euro zone is steadily slipping away," said Lee Hardman, currency economist at BTM-UFJ.

"The renewed concerns about the banking sector, the widening spreads, especially for Irish bonds, is a reality that the market will focus on in coming months and will haunt the euro. We think going into the year end, growth in the euro zone will slow markedly."

By 1055 GMT, the euro had shed nearly 1 percent on the day to $1.2750. It fell as low as $1.2737, off a three-week high of $1.2920 hit on Monday. The focus was turning to significant option expiries on Thursday, when an estimated 1 billion euros are set to roll off at $1.2600.

"We've seen the euro's correction since June take it to the $1.30 region, and people are getting worried about more negative news about the euro zone banking sector in the third and fourth quarter," said Chris Turner, currency strategist at ING.

DOLLAR/YEN BELOW 84 YEN

Against the yen, the single currency fell 1.2 percent on the day to 107.10 yen. The Japanese currency rallied across the board, pushing the dollar down 0.4 percent. The greenback fell as low as 83.72 yen on Tuesday, close to a 15-year trough of 83.58 yen touched last month.

The yen hit the day's high after Bank of Japan Governor Masaaki Shirakawa said monetary authorities could not control forex rates, increasing speculation Japan was not preparing to act to stem yen strength at the moment. [ID:nTOE68606B]

"(Shirakawa) has essentially ruled out intervention in the near term," CitiFXWire analysts said in a client note adding that the statement helped to encourage yen bulls.

Shirakawa's comments followed the BOJ's decision to hold off from additional monetary policy easing. [ID:nTOE68602K]

Japanese Finance Minister Yoshihiko Noda said the government would take firm action on currencies when needed, adding that recent moves were clearly one-sided. [ID:nTKX006976]

Analysts said the difference in stance between the government and the central bank clearly put the onus on the government to take decisive action to rein in yen strength.

"The risk of intervention is great, but this will only slow the appreciation rather than cause any trend reversal," said BTM-UFJ's Hardman.

The market's focus on risk aversion also boosted the Swiss franc, pushing the euro 0.9 percent lower to 1.2909 francs. The dollar was flat at 1.0122 francs.

The Australian dollar was down 0.7 percent at $0.9112, hurt by a general lack of risk appetite and after the ruling Labor Party secured enough numbers to form a minority government. [ID:nSGE6850I3]. Labor's return to power rekindled talk the government would press ahead with a mining tax.

(Graphic by Scott Barber, additional reporting by Naomi Tajitsu)