* Yen rises vs euro and other major currencies
* Yen gets respite after this week's slide
* Traders say Japan investors sold foreign assets
* Risk appetite still seen on recovery track
By Satomi Noguchi
TOKYO, March 25 (Reuters) - The yen climbed against the euro and the Australian dollar on Wednesday, getting some respite after its fall to multi-month lows the previous day with Japanese investors seen selling foreign assets before the financial year-end this month.
The dollar held on to much of the gains made on Tuesday on profit-taking in the wake of its slide last week, when it suffered its biggest weekly fall since 1985 against a basket of six major currencies.
"The rise in the yen today is seen purely as part of a reversal of its sharp fall in the past few days," said Yuichiro Nakamura, a trader at Shinkin Central Bank.
"There was no news or a worrisome factor in the market to back the yen's move, while most of the news in recent days has been positive for the market," said Nakamura.
Other traders attributed the yen's rise to Japanese investors repatriating funds from overseas with the approach of the end of the financial year on on March 31.
The euro fell 0.2 percent against the yen to 131.62 yen, having pulled back from a five-month high of 134.50 yen hit on trading platform EBS on Tuesday. It fell as low as 130.98 on EBS earlier.
The dollar dropped 0.2 percent to 97.60 yen, having come off a one-month low of 93.55 yen hit last week.
The Australian dollar dipped 0.2 percent to 68.06 yen, off a 4-½ month high of 69.60 yen hit on Tuesday.
RISK AVERSION EASING
The dollar, which tends to attract safe-haven buying at times of market stress, was also supported after U.S. shares slipped on Tuesday, a day after euphoria over a U.S. plan to rid banks of bad assets triggered a huge rally on Wall Street.
But gains in global equities and commodity prices over the past few weeks suggested that risk appetite was on a recovery track, boding ill for the yen and the dollar against higher-yielding currencies, traders said.
While there is uncertainty about how long this will last, risk aversion does seem to be easing for now, said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo. "There are clear signs of a recovery in risk tolerance among institutional investors," Tomita said.
The euro was nearly flat at $1.3470, having retreated from a 2-½ month high of $1.3739 hit last week.
With its rally last week, the euro has made a 50 percent retracement of its fall from a December peak of $1.4720 to this month's low of $1.2457. The euro was due for some profit-taking, said a trader for a Japanese trust bank, referring to the euro's 1.3 percent slide against the dollar on Tuesday.
The dollar index saw its biggest weekly drop since 1985 last week, pummelled after a surprise announcement by the Federal Reserve that it would buy a large amount of long-dated Treasuries.
That raised concern of an oversupply of the world's mainen ($841.6 million) surplus contrasted with economists' forecasts for a deficit of 10.9 billion yen.
The surplus comes after Japan posted its largest deficit ever in January, when exports fell sharply due to a slowdown in the global economy.
But seasonally adjusted data showed a trade deficit for February and analysts said exports were likely to stay in decline for a while due to weak overseas demand. ($1=97.91 Yen) (Additional reporting by Masayuki Kitano; Editing by Michael Watson)