* Yen holds steady as Asian shares fall
* Trade subdued before weekend, Chinese New Year holidays
* Sterling weak before GDP, retail sales data
By Kaori Kaneko
TOKYO, Jan 23 (Reuters) - The yen held firm against major currencies on Friday on lingering concerns about the global banking sector and economic fears.
Trade was subdued and investors appeared mainly to be adjusting positions given few major economic events ahead of the weekend and the Chinese New Year holidays next week.
The Japanese currency hovered near a 13-½ year high against the dollar and stayed not far from a seven-year peak against the euro hit earlier this week amid banking woes overseas.
The yen was also supported as Asian shares slipped, with Tokyo's Nikkei share average falling 2.8 percent on growing risk aversion.
The MSCI index of Asia-Pacific stocks outside Japan shed 1.7 percent.
"There is a move towards risk aversion against countries with fragile economies, notably Europe and the U.S.," said Toru Umemoto, chief FX strategist at Barclays Capital.
But he also said the dollar was staying firm versus other currencies than the yen partly thanks to the swift and drastic economic steps in the United States.
Traders said the yen continued to be well-bid as a relatively safe currency because investors' risk appetite remained low on fears over the deepening global recession.
Market players were keeping an eye on any comments from Japanese authorities about possible currency intervention.
Japanese Finance Minister Shoichi Nakagawa said on Friday he was watching financial markets very carefully.
Economic problems in the United States and Europe were affecting Japan's stock and currency markets, Nakagawa told a news conference.
"If the dollar drops below 85 yen, or the currency market shows a sharp movement, caution about Japanese intervention will increase. But it is unlikely that Japan will intervene at the current market levels," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.
The dollar was supported by comments from Treasury Secretary nominee Timothy Geithner, who said a strong dollar is in the United States' interest.
His comments came on Thursday when he won the Senate Finance Committee's backing to head the U.S. Treasury.
The dollar was little changed at 88.98 yen from U.S. trading on Thursday and still in sight of Wednesday's low of 87.10 yen, the lowest since July 1995.
The euro dipped 0.3 percent to 115.26 yen, not far from 7-year trough of 112.08 yen touched on Wednesday.
Against the dollar, the euro was down 0.4 percent to $1.2950.
POUND DOWNBEAT
Sterling stayed under selling pressure on persistent concerns about losses in the UK banking sector and economic distress.
Traders awaited the UK's preliminary economic growth data for the fourth quarter and retail sales for December, both due later on Friday.
Britain's economy likely shrank 1.2 percent from the previous quarter while the retail sales data is seen showing a fall of 0.6 percent from a month earlier, according to Reuters surveys.
Sterling will likely dip if the data comes in weak, though the currency could then rebound as traders are expected to square positions ahead of the weekend, analysts said.
The pound fetched $1.3828, down 0.4 percent from New York trade and not far from the 23-year low of $1.3620 hit on Wednesday."
Against the Japanese currency, the pound slipped 0.2 percent to 122.84 yen, but off the record low of 119.36 yen hit this week. (Reporting by Kaori Kaneko; Editing by Hugh Lawson)