FOREX-Yen rises broadly on global economic worries

* Yen rises broadly on fears over global economic slowdown

* Japanese retail investors may be repatriating funds

By Satomi Noguchi

TOKYO, Oct 15 (Reuters) - The yen gained broadly on Wednesday as investors turned risk-averse after shares in Asia fell on fears that the credit crunch would lead to a sharp slowdown in the global economy.

Stock markets in South Korea and Hong Kong slid more than 2 percent, dampening sentiment that had been boosted by aggressive bank rescue measures around the world.

"We are in a phase of recovering confidence about the banking sector, but the market's focus is shifting to the health of global economy," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.

Some traders said Japanese retail investors may be repatriating investments overseas after seeing a historical sell-off in global stock markets last week, strengthening the yen.

The euro fell against the yen and the dollar on selling from hedge funds after data from Germany showed a bigger-than-expected slide in investor sentiment in October, suggesting the euro zone's top economy may be in for a prolonged slump.

The euro fell around 0.8 percent from late New York trade on Tuesday to 138.07 yen after dipping as low as 136.95 yen on trading platform EBS.

On Tuesday, the euro rebounded more than 2 percent to near 142 yen, rising sharply from a three-year low of 132.15 yen hit late last week, on hopes that actions taken by European governments to recapitalise their banking systems would ease the credit crisis.

The single currency dropped 0.2 percent against the dollar to $1.3589 , but the losses were relatively limited as the economic outlook for the U.S. was also gloomy.

The President of the Federal Reserve Bank of San Francisco, Janet Yellen, said late on Tuesday that the U.S. economy "appears to be in a recession". [ID:nN14265967]

The dollar fell around 0.6 percent to 101.60 yen , retreating further from the previous day's high above 103 yen.

The yen is one of the biggest beneficiaries when investors demand safety and unwind carry trades, in which the low-yielding Japanese currency is used to fund investments in higher-yielding currencies and riskier assets.

Panic over the global banking system sent the yen to a six-month high of 97.91 yen against the dollar on Friday.

Traders said fears about the financial crisis receded after short-term interest rates for dollars eased in response to the U.S. announcement that it would inject $250 billion into banks, including the country's nine largest lenders.

The action followed similar pledges in Britain, France and Germany.

But the overall state of the market remained fragile, making prices very volatile.

"Global investors continue to cut risky investments and prefer to keep them as cash, and that's helping the yen's broad gains," said Shuichi Kanehira, a senior trader at Mizuho Corporate Bank.

The Canadian dollar edged up slightly against the U.S. dollar after Canadian Prime Minister Stephen Harper won a strengthened second minority government mandate on Tuesday, according to provisional results. [ID:nN13406994]

The U.S. dollar briefly fell as low as C$1.1595 , off a high of C$1.1688 hit earlier in the day, and down from a three-year peak of C$1.2135 struck on Friday.

"A minority win by the Conservatives was entirely expected, but there had been some uncertainty as to the extent of that minority victory," said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. (Additional reporting by Eric Burroughs and Masayuki Kitano)