* Yen surges broadly, reverses earlier losses
* Obama prepared to let Chrysler go bankrupt - report
* Yen had slid near 1-mth lows after BOJ tankan
By Satomi Noguchi
TOKYO, April 1 (Reuters) - The yen surged broadly on Wednesday after a report that President Barack Obama was prepared to let carmaker Chrysler go bankrupt, stirring risk aversion in the market and helping the yen to reverse losses against the dollar and the euro.
Obama is ready to let Chrysler LLC go bankrupt and be sold off piecemeal if the third-largest U.S. automaker cannot form an alliance with Fiat SpA, Bloomberg reported, quoting members of Congress briefed on the subject and two other people familiar with the administration deliberations.
The yen had fallen earlier and hit a one-month low against the dollar after the Bank of Japan's tankan corporate survey showed a dire picture of an economy in recession.
"The report about Chrysler's possible bankruptcy is now impacting the whole market," said a senior trader at a Japanese bank.
"U.S. stock futures are looking terrible after a positive close in New York, prompting market players to dump currencies they had bought against the yen," the trader said.
Reduced investor risk appetite sent higher-yielding currencies such as the Australian dollar lower, dented by data showing Australian retail sales fell more than expected.
The New Zealand dollar extended big slides after New Zealand's central bank warned on Wednesday that a recent rise in market interest rates was unwarranted and out of sync with its view of the economy.
The dollar fell 0.2 percent from late New York trade to 98.76 yen. It tumbled as low as 98.21 yen on trading platform EBS from an earlier high of 99.48 yen, the highest since March 5.
The euro fell 0.3 percent to 130.80 yen after falling as low as 129.94 yen from earlier highs near 131.90 yen.
The euro was down 0.5 percent to $1.3185 near day's lows.
Confidence among Japan's big manufacturers tumbled at its fastest pace ever in the first quarter to the worst on record, the BOJ's tankan corporate survey showed.
It highlighted the pain companies are facing as the global economic crisis scythes through Japan's exports. (Editing by Michael Watson)