* Yen stays near 5-month high vs dollar, 2-mth peak vs euro
* Caution towards forex intervention grows
By Rika Otsuka
TOKYO, July 9 (Reuters) - The yen steadied on Thursday, close to a five-month high against the dollar and a two-month peak versus the euro hit the previous day when mounting doubts about the health of the global economy spurred risk aversion.
The dollar and the euro both fell more than 2 percent against the yen on Wednesday, posting their sharpest one-day drops since March.
In recent weeks, optimism about the global economy's recovery prospects has started to wane, prompting investors to trim riskier assets such as stocks while seeking the safety of government debt.
Dealers said the dollar's fall had been exacerbated by automatic sell orders triggered around 94.00 yen. As the dollar fell below that level, liquidity dried up, steepening the plunge.
"The dollar remains vulnerable as U.S. Treasury yields slid yesterday, narrowing the dollar's yield advantage over the yen," said Minoru Shioiri, senior manager of forex trading at Mitsubishi UFJ Securities.
"But the greenback is unlikely to plunge against the yen during Tokyo trade as those who needed to cut long dollar positions have already dumped enough dollars."
Market participants were increasingly cautious about possible market intervention by Japanese officials to fight the currency's rapid rise, which hurts Japanese exporters by eating into profits made overseas when the profits are repatriated.
But few expect immediate action by Japanese authorities as the yen is still far away from this year's peak against the dollar, traders said.
In January, the dollar fell to near 87 yen, its weakest since July 1995.
The dollar edged down 0.1 percent from late U.S. trade to 92.80 yen. It hit a five-month trough of 91.80 on trading platform EBS the previous day.
The euro dipped 0.1 percent to 128.80 yen after falling as low as 127.00 yen on Wednesday, its lowest since mid-May. The euro was down 0.1 percent to $1.3871. (Reporting by Rika Otsuka; Editing by Edwina Gibbs)