* Dlr, yen climb, risk aversion up on swine flu uncertainty
* Euro slides, traders take profits on last week's rally
* Mexican peso falls 3 percent vs dollar, hits 3-week low
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, April 27 (Reuters) - The Mexican peso fell on Monday on concerns about swine flu, and uncertainty about how far the virus may affect markets increased risk aversion, stinging higher-yielding currencies and boosting the dollar and the yen.
The euro also slumped across the board as traders locked in profits from a rally last week following stronger than expected economic data from the euro zone region.
The Mexican peso fell as much as 3 percent versus the dollar as the threat of a flu pandemic rose after more than 100 people were confirmed to have died from the virus, which has spread across North America and as far as New Zealand.
Such concerns pushed currencies including the Australian and New Zealand dollars and the euro lower on the day, but they trimmed some losses against the dollar as some European traders reckoned that the selling in earlier trade had been overdone.
"It's hard to know just how bad it is or who are the likely winners and losers from the situation and how it will be contained," said Martin McMahon, currency strategist at Credit Suisse in Zurich.
He added that the knee-jerk reaction in the currency market has been to dump high-yielding currencies including the Australian and New Zealand dollars in favour of the dollar and the yen, which are considered safe bets in times of uncertainty.
"It's very early days, no one knows the severity of the situation ... it's hard to see what impact it would have generally on currencies apart from risk appetite."
By 0941 GMT, the euro was down 0.8 percent at $1.3145, having fallen roughly 1 percent to a session low of $1.3120 in earlier trade. It had risen 1.5 percent last week on the back of a stronger than expected reading of the Ifo institute's German business confidence survey.
The peso traded at 13.6400, after hitting a 3-week low around 13.6990 per dollar in early trade. The pair was down roughly 3 percent on the day, having ended at 13.284 pesos on Friday, according to the central bank's final reference.
Concerns that the flu may turn into a pandemic stung stock markets around the world, pushing European shares down 1.3 percent.
Heightened risk aversion pushed the higher-yielding Australian and New Zealand dollars each down as much as roughly 1.5 percent against the U.S. currency early in Europe, before trimming losses to trade 1 percent lower.
"To some extent the reaction has been overdone," said Lauren Rosborough, senior currency strategist at Westpac Institutional Bank in London. "Unless it comes out that this has become a pandemic, I would imagine the market will fade any rally in the dollar."
The New Zealand currency was also under selling pressure because its central bank is expected to cut benchmark interest rates to a record low of 2.5 percent this week and signal no raise for a while.
Losses in those currencies helped to support the yen broadly. The dollar was down 0.6 percent at 96.60 yen, not far from a 1-month low around 96.50 yen in earlier trade. The euro fell 1.3 percent to 126.93 yen.
Despite its losses against the yen, the dollar's value against a basket of currencies pushed up 0.6 percent to 85.245.
ECB AWAITED
In addition to the swine flu issue, analysts said that market participants were also focusing on the European Central Bank's policy meeting next month.
The central bank is widely seen cutting its key interest rate to 1 percent from 1.25 percent, and investors are watching to see whether it will outline possible quantitative easing measures to help boost the economy.
ECB Governing Council member Nout Wellink was quoted in the media as saying that the central bank should discuss lowering rates below 1 percent. Another member, Axel Weber, was quoted separately as saying that a cut to 1 percent was appropriate.
News from a meeting of world finance leaders in Washington at the weekend was overshadowed by the swine flu concerns.
The finance leaders agreed there was a "break in the clouds" of the economic storm but said more measures were needed to ensure an end to the global recession. (Editing by Ruth Pitchford)