* Yen falls broadly, EUR/JPY hits 10-month high
* Market focus on rate differentials, Fed comments boost USD
* Asset managers go tentatively long of carry trades
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By Naomi Tajitsu
LONDON, March 30 (Reuters) - The yen slipped to a 10-month low versus the euro and was broadly weaker on Wednesday after recent hawkish comments from euro zone and U.S. officials contrasted with Japan's loose monetary policy stance.
The euro rose to around 117.28 yen, its strongest since May 2010, and was seen climbing more on expectations the European Central Bank will start raising interest rates as early as next month.
A positive tone in equity markets bolstered risk appetite and encouraged investors to seek higher-yielding assets, with the Australian dollar rising to a 29-year high over its U.S. counterpart and a 10-month high against the yen.
The dollar rose to around 83.19 yen, a level last seen on March 11 when the yen initially fell after Japan's earthquake. Traders reported offers at 83.30/50, with orders then said to be thin until more supply placed at around 84.00.
Hawkish comments in recent days from U.S. Federal Reserve and European Central Bank officials contrasted with the stance taken by the Bank of Japan, which is set to leave interest rates near zero for some time to support the world's third-largest economy as it recovers from the effects of the earthquake.
Dallas Fed President Richard Fisher said on Tuesday he would vote against further monetary easing after the Federal Reserve's $600 billion bond buying programme ends in June.
That pushed up short-dated U.S. Treasury yields, widening their differential with Japanese ones as investors took the comments as an indication of eventual monetary tightening.
"The yen is very sensitive to rate differentials, and with U.S. short-end yields going up on expectations the Fed will at some point raise rates, the dollar is rising against the yen," said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.
The comments supported the dollar across the board, nudging the euro down 0.2 percent on the day to $1.4082 and boosting the dollar slightly against a currency basket.
Credit Suisse's Hettinger said dollar gains may be short-lived as an actual rate rise by the Fed is still expected to be a long way off, while expectations the ECB will raise rates next month and beyond would continue to support the euro.
Such anticipation has pushed the euro more than 5 percent higher against the dollar this year, and its apparent resilience to fiscal problems facing weak euro zone countries has led some to nickname it the "Teflon euro".
"I would be confident in the euro at these levels," said Pierre Lequeux, head of currency management at Aviva Investors. "I like the euro, basically, and I see some upside."
He said he would be interested in the euro even if it moved towards $1.45-1.50, arguing that authorities were unlikely to voice opposition to the euro at $1.50 given the outlook of rising inflation and a pick-up in economic growth in the region.
The sovereign debt crisis was unlikely to significantly weaken the euro in the longer term as long as it did not lead to a break-up of the euro zone, Lequeux said, while a weak jobs picture would keep the Fed from raising rates any time soon.
AUSSIE SHINES
Speculation that Japanese investors may reduce dollar hedging positions related to their overseas investments, and the absence of huge repatriation flows following the quake, are shifting the focus back to economic fundamentals and reinforcing the yen's status as a funding currency.
"We're seeing asset managers and hedge funds starting to dip their toes back into carry trades, but it's quite tentative at this stage," said Geoffrey Yu, currency strategist at UBS, in an interview with Reuters Insider.
The market's focus on rate differentials benefited higher-yielding currencies including the Australian dollar, which traded at $1.0310, near a 29-year high of $1.0334 hit earlier in the day.
The Aussie traded at 10-month highs of around 85.70 yen as a positive day for world stockmarkets encouraged investors to hold riskier assets. (Additional reporting by Neal Armstrong, editing by Catherine Evans)