* Yen rises vs dollar, but dips vs euro, Aussie, kiwi
* Limited impact from worse-than-expected BOJ tankan
* Focus on fate of U.S. automakers, share prices
* Fed rate cut prospect weighs down on dollar vs euro
By Masayuki Kitano
TOKYO, Dec 15 (Reuters) - The yen rose against the dollar on Monday, but stayed well below 13-year highs hit last week as a rally in Asian shares pointed to some recovery in risk appetite and curbed demand for the yen.
The yen rallied on Friday to as high as 88.10 yen per dollar on trading platform EBS, its highest since 1995, after the U.S. Senate rejected a rescue plan for U.S. automakers.
The Senate decision pummelled stock markets, stoked worries about a decline in risk appetite and gave a boost to the yen on Friday.
But the yen later fell back, partly because market players became mindful of risks that Japanese authorities could intervene to curb sharp rises in the yen.
The yen initially edged higher against the dollar on Monday, but pared its gains as Tokyo shares rallied after relief over a possible lifeline for the struggling U.S. auto industry lifted Wall Street.
"Share prices are all positive, starting with Australian shares," said a trader for a European bank.
Equities are regarded as a barometer of investors' appetite for risky carry trades, in which investors sell low-yielding currencies like the yen to invest in higher-yielding currencies and assets.
The dollar dipped 0.3 percent against the yen to 90.88 yen, but was up from an intraday low of 90.49 yen hit earlier on trading platform EBS.
Higher-yielding currencies rose against the yen, with the euro rising 0.5 percent to 122.50 yen, and the Australian and New Zealand dollars rising against the yen as well.
Investors remained cautious about the impact of crumbling U.S. automakers on the wider economy, weighing down on the dollar, traders said.
The White House said on Friday it was considering tapping a $700 billion financial industry bailout fund to prevent a collapse of ailing U.S. automakers.
But U.S. President George W. Bush said on Monday an announcement on a auto industry rescue was not imminent, leaving the industry's fate clouded in uncertainty for a little longer.
Against the dollar, the single European currency rose 0.8 percent to $1.3478 after hitting two-month highs of $1.3497 earlier.
Market players said the euro was drawing support in the wake of recent comments by European Central Bank policymakers that have cast some doubt on how soon and how aggressively the ECB may cut rates. European Central Bank Governing Council member Yves Mersch said on Friday the bank still had some room to cut interest rates but needed to use its main weapon against the recession wisely.
"With some market projections pointing to a rate cut of up to 0.75 percentage points by the Fed, the market is also focusing on quantitative easing," said Yuji Saito, head of the foreign exchange sales department at Societe Generale.
"Interest rate differentials between the U.S. and the euro zone are likely to widen as expectations for bold rate cuts in the euro area have been scaled down," he added.
The Federal Reserve is widely expected to cut rates at least a half-percentage point to 0.5 percent from 1 percent on Tuesday at the conclusion of its two-day policy meeting.
DOLLAR AND THE YEN
Analysts said there was still a risk of the dollar falling below Friday's 13-year low against the yen later this month.
"There are still a lot of yen carry trades out there, and there might be some kind of negative event that causes them to be unwound," said Toru Umemoto, chief foreign exchange strategist for Japan at Barclays Capital.
Masafumi Yamamoto, head of foreign exchange strategy for Japan at the Royal Bank of Scotland, also said the dollar could fall further against the yen.
"Volatility is high and there are not any particular buyers (of dollars). If some kind of negative factor emerges, there could be a fall to below 88 yen," Yamamoto said. One factor that could temper any rise is the risk that Japanese authorities may intervene in currency markets by selling the yen.
A trader for a Japanese trust bank said it would not be surprising to see such intervention at levels of 90 yen or below for the dollar.
But Umemoto at Barclays Capital said he was surprised to see market players so worried about a possible intervention.
"At a time when the 'Big Three' are near collapse, I doubt that intervention, which could protect the Japanese car industry, can be conducted," Umemoto said.
Market players said there was limited currency reaction to the Bank of Japan's tankan business sentiment survey.
The headline index for big manufacturers' sentiment fell to a nearly seven-year low of minus 24, down from minus 3 in the previous survey in September and just below economists' median forecast of minus 23. (Additional reporting by Kaori Kaneko)