* Yen higher vs dollar, euro on safe-haven flows
* Nuclear accident, Mideast unrest, falling shares drive flows to yen
* Euro above 1-1/2 week low after Trichet comments
By Natsuko Waki
TOKYO, March 29 (Reuters) - The yen ticked up versus the dollar and euro on Tuesday as concerns about Japan's nuclear crisis and Middle East unrest prompted flows into the low-yielding Japanese currency, while expectations of an interest rate hike supported the euro.
Risk sentiment soured after the discovery of plutonium in soil at the stricken Fukushima nuclear plant heightened alarm over Japan's battle to contain the world's worst atomic crisis in 25 years. [ID:nL3E7ES2ND]
Uncertainty over the impact of the fighting in oil producer Libya and spreading unrest in the Middle East further clouded the corporate earnings outlook, weighing on U.S. and Tokyo shares.
The yen had come under pressure earlier this week as hawkish comments from Federal Reserve officials raised speculation the Fed is preparing the ground for ending its easing programme, widening an interest rate gap in favour of the dollar.
"In the near term, there are some risk aversion-related flows from the nuclear problem and the Middle East, which are lending support to the yen," said Masafumi Yamamoto, chief currency strategist at Barclays Capital.
"The impact of the earthquake is not fully realised. The current risk environment is preventing the dollar/yen from tracking interest rate differentials."
The dollar fell 0.2 percent to 81.55 yen , moving further away from 82.00 -- the March 18 high hit after the world's major central banks intervened to stem the yen's strength.
A customer dealer for a major Japanese bank in Tokyo reported a significant amount of dollar offers at and above 82 yen, mainly from Japanese exporters.
He also said the dollar may be pulling back after rising the previous day, when there was talk of buying by model funds and macro funds, adding that the dollar could fall as low as 80.80 on Tuesday.
However, analysts said players would be reluctant to push the dollar below 80 yen on worries about further intervention.
Rate support for the dollar waned after Fed officials said on Monday that the U.S. economy still needed support from the central bank's full $600 billion planned bond purchases [ID:nN28221312].
"The likely dip in confidence in the wake of the Japan earthquake and evidence of deepening housing deflation can both serve as reminders that the majority of FOMC members are unlikely to consider current economic performance good enough to meet the hurdle rate for a premature end to QE2," BNP Paribas said in a note to clients.
The dollar index , which tracks the U.S. currency's performance against a basket of major currencies, was slightly higher on the day at 76.193.
The two-year U.S. Treasury yield had risen to a three-week high at 0.785 percent at one stage, up more than 14 basis points in five days, widening its gap over comparable Japanese yields.
EURO STABILISES
The euro was steady at $1.4068 , stabilising above a 1-1/2 week low. The euro briefly rose above $1.41 on Monday after ECB President Jean-Claude Trichet said inflation in the euro zone is "durably" above the ECB's target.
The euro's support levels are seen at $1.4000 and $1.3997.
Trichet's comments reinforced expectations for a rate hike next month and helped to relieve pressure on the single currency from the euro zone debt crisis, with concerns rising about Portugal's ability to finance itself.
"EU periphery issues remain raw, but Trichet reminded that the ECB remains poised to hike rates soon. The ECB Governing Council meets on 7 April and is expected to hike rates 25 basis points," David Watt, strategist at RBC, wrote in a client note.
Still, the common currency is not out of the woods yet with investors closely watching the results of the European Union bank stress tests on Thursday, where Irish banks are in focus.
The test of the banks' reserves under adverse scenarios is required under the terms of the EU/IMF bailout and is expected to show a fresh capital hole of between 18 billion and 23 billion euros, local Irish media have reported. [ID:nLDE72R05Q]
Sterling nursed losses after weak UK data raised questions about how soon the Bank of England can raise rates.
The pound last traded at $1.5988 , having fallen as low as $1.5937. It is seen vulnerable to a drop towards $1.5750, after piercing $1.60.
In contrast, the high-flying Aussie was consolidating at $1.0232 after striking a fresh 29-year high at $1.0315.
Westpac analysts said the Aussie was looking tired after gaining 6 cents in 11 days, and looked ready for a modest correction towards $1.02. (Additional reporting by Ian Chua and Masayuki Kitano; Editing by Edmund Klamann)