* Yen falls after Dubai says gets funds from Abu Dhabi
* Euro rises vs dollar,recovers to stand steady on day vs yen
TOKYO, Dec 14 (Reuters) - The yen fell sharply and the euro rose on the dollar after Dubai said it had received $10 billion from Abu Dhabi to help it repay a bond maturing on Monday, as currency players were forced to cover short positions.
Financial markets were hit in November by concerns about Dubai's debt problems, and the dollar, which had been down on the day, shot up almost half a yen to 88.90 yen after the Dubai statement on Monday.
The euro, which had also been down on the day, leapt about one yen to 130.40 yen.
The low-yielding yen, which gets used to fund investments into riskier assets, had benefited when worries about Dubai were at their height in November, hitting a 14-year peak against the dollar that week as investors unwound risker trades and bought the Japanese currency back.
It has retreated as those worries have subsided but was gaining on Monday as investors unwound more risky trades in currencies such as the Australian dollar ahead of the year end.
"Market players have been expecting this issue to move in this direction. If this had not materialised, it would have given people pause," said Kimihiko Tomita, head of foreign exchange at State Street Global Markets in Tokyo.
When news of Dubai's debt woes emerged a few weeks ago, market players had sold the euro and bought the yen, Tomita said.
Monday's statement may have helped spur some short-covering in the euro against the yen, although such moves were likely relatively mild, Tomita said.
A manager for a Japanese trust bank said the currency market reaction had been exaggerated by market positioning just before the Dubai announcement, pushing dollar/yen and other yen crosses higher in a short squeeze.
The euro stood 0.4 percent up on the day at $1.4670 and had recovered to stand flat on the day at 130.44 yen, after falling as far as 129.19 earlier.
The dollar pulled off the day's lows to stand just 0.3 percent down on the day at 88.83 yen after dipping as far as 88.36 yen. (Reporting by Satomi Noguchi and Masayuki Kitano; Writing by Charlotte Cooper; Editing by Joseph Radford)