* Yen rallies as stocks slip, dealers trim bearish bets
* Aussie down as CPI dents expectations of bigger rate hike
* Norges Bank expected to raise rates (Updates prices, adds comment and quotes, changes byline and dateline. pvs TOKYO)
By Jamie McGeever
LONDON, Oct 28 (Reuters) - The yen strengthened across the board and the Australian dollar fell on Wednesday as Australian inflation data and broad weakness in global stocks prompted traders to trim positions and reduce risk exposure.
Australian consumer price inflation was generally in line with forecasts but not strong enough to justify expectations for an aggressive interest rate increase next week, which pushed the Australian dollar to a two-week low.
This followed surprisingly weak U.S. consumer confidence figures on Tuesday which also dampened investor appetite for riskier assets.
The dollar index, a broad measure of the greenback's value against six currencies, was flat. The dollar was down against the yen but gained ground against commodity currencies, and was flat against the euro and sterling.
"The Nikkei is weaker and this increase in risk aversion usually benefits the yen, although this kind of correlation has been be waning a bit recently," said Johan Javeus, strategist at SEB in Stockholm.
Japanese stocks fell 1.35 percent and European shares opened lower.
Javeus also cited profit-taking from the dollar's rise to a one-month high against the yen earlier this week.
The dollar fell 0.7 percent to 91.13 yen, retreating from a one-month high of 92.33 yen hit on EBS the previous day.
The spread of 10-year U.S. Treasury yields over Japanese government bond yields shrank to 203 basis points from as much as 215 bps the previous day after a well-received U.S. 2-year note auction. This also weighed on dollar/yen.
The euro fell 0.7 percent to 135.05 yen, pulling back from a more than two-month high of 138.49 yen hit on trading platform EBS on Monday.
The dollar index, a gauge of its performance against six major currencies, was little changed at 76.12, holding close to a two-week high of 76.328 on Tuesday.
The euro was unchanged on the day at $1.4812, not making much headway after falling to a two-week low of $1.4769 the previous day as investors trimmed long positions after disappointing U.S. consumer confidence figures.
It had hit a 14-month high of $1.5064 on Monday.
EYES ON NORWAY
The Australian dollar was down 0.8 percent on the day at $0.9090, and overnight interest rate swaps markets showed investors now looking for no more than a 25 basis point rate rise at the Reserve bank of Australia's meeting next week.
"We've had an almost uninterrupted increase in the Aussie dollar since the end of June, and an acceleration of that move in October, so there's bound to be a lot of profit-taking," Javeus said.
Attention in Europe is on Norway, with Norges Bank expected to become the first European central bank to raise interest rates since the global financial and economic crisis.
A quarter point rate rise to 1.5 percent is so widely anticipated that traders sold the Norwegian crown against the euro on Wednesday, cashing in on its sharp rise to a 14-month high earlier this month.
"This outcome is well anticipated so the relevant question is whether or not the tone will turn significantly more hawkish, suggesting an acceleration of the tightening cycle. We don't think this will be the case," said Societe Generale strategists in a note to clients.
The euro was last up slightly at 8.38 crowns. Earlier this month it fell below 8.25 crowns for the first time since August last year. (Reporting by Jamie McGeever; editing by Mike Peacock) (Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net; +44 207 542 8510))