* Dollar rises vs euro on position unwinding
* Focus on fate of bailout for US automakers (Corrects first bullet point to .... vs euro ..., not ... vs dollar)
By Kaori Kaneko
TOKYO, Dec 9 (Reuters) - The dollar rose against the euro on position unwinding on Tuesday, reversing some of the losses it suffered the previous day when a steep rally in global equities gave a boost to risk appetite.
But market players said it may be too early to conclude that the currency market has started to increase risk tolerance.
"The dollar's dip yesterday seems to have been largely driven by position adjusting, and it is premature to say that the trend in the currency market has changed," said Yousuke Hosokawa, treasury department senior manager at Chuo Mitsui Trust and Banking Company.
The euro fell 0.4 percent to $1.2912 after the European single currency rose as high as $1.2968 in U.S. trading, the highest since late November.
U.S. stocks rallied to their highest level in a month on Monday on hopes that U.S. President-elect Barack Obama's plan for massive infrastructure spending could limit the pain of recession and that the government may decide on a rescue plan for troubled U.S. automakers.
Market players remain focused on whether a bailout plan for U.S. automakers will be finalised.
The White House reviewed a Democratic plan to bail out car makers with up to $15 billion in loans, in a move that could also clear the way for longer-term help if the industry meets certain conditions.
"The rescue plan being discussed is not strong enough to solve the fundamental problem of the industry. Although the government is trying to do its best to prevent the worst situation, more government spending always carries concerns about its fiscal situation," said Hosokawa at Chuo Mitsui Trust.
Against the yen, the euro dipped 0.4 percent to 119.82 yen.
The dollar was steady at 92.83 yen from late U.S. trading.
The market showed little reaction to a worse-than-expected revision to Japan's third quarter growth figures. Japan's economy shrank 0.5 percent in the third quarter, more than economists' forecasts for a 0.2 percent contraction, confirming that the economy is in recession. (Reporting by Kaori Kaneko)