* Yen retreats as buoyant shares improve risk appetite
* Asia shares rally on China economic stimulus
* Market watching G20 summit meeting at the weekend
By Shinichi Saoshiro
TOKYO, Nov 10 (Reuters) - The yen fell against the dollar and the euro on Monday as a rally in Asian shares improved investors' appetite for risk, reducing demand for the Japanese currency.
Asian shares were boosted by China's launch of a huge economic stimulus plan on Sunday, following a rebound on Wall Street on Friday.
China announced an economic stimulus package worth nearly $600 billion in what could mark the start of a round of big spending or interest rate cuts by leading economies to stave off recession.
The Nikkei average jumped 6 percent at one point after China's move boosted investor confidence.
"The market panic over the yen's appreciation seems to have passed. Stock rallies helped ease market participants' anxiety," said Mitsuru Sahara, senior manager at Bank of Tokyo-Mitsubishi UFJ.
Share prices are regarded as a barometer of investors' risk appetite, and their rise can halt the unwinding of risky carry trades.
Carry trades involve the sale of low-yielding currencies like the yen to invest in higher-yielding currencies and assets.
The dollar rose to 98.95 yen, up 0.7 percent from late U.S. trading on Friday.
The euro gained 1.9 percent to 127.30 yen on trading platform EBS Against the dollar, the euro rose 1.2 percent to $1.2865.
Yet investors remained unwilling to take risks as they are worried about the depth of the economic slowdown, Saraha at Bank of Tokyo-Mitsubishi UFJ said.
He said that the market swings between the optimistic view that rate cuts and stimulus packages will bring stability to the market, and the pessimistic view that the economy will deteriorate further in spite of those measures.
"Players will be keeping an eye on moves by U.S. authorities and remarks by officials as well as corporate news, especially regarding financial companies and the automobile industry there," Sahara said.
On Friday, the U.S. Labor Department reported that U.S. jobless rate hit a 14-year high just as General Motors and Ford Motor Co. said they were fast burning through cash for operations.
Following the unveiling of China's large stimulus package, market players are looking out for steps that could impact currencies such as the policy steps to be announced by U.S. President-elect Barack Obama and the Group of 20 leaders' summit in Washington on Saturday.
Financial officials from the G20, which includes developing powers such as China and Brazil as well as industrialised nations, agreed on ways to stimulate growth at a meeting in Sao Paulo, Brazil, at the weekend.
They will hold further discussions on the matter on Saturday in Washington.
Analysts say the yen could bounce back against the dollar and euro unless the equities are able to find fresh factors to sustain them.
"The G20 meeting is still days away and the stock markets will need follow-through incentives to maintain their momentum," said Masafumi Yamamoto, head of forex strategy in Japan at Royal Bank of Scotland.
"The yen stands to rebound if equities cannot keep their gains," Yamamoto said.
Traders said Japanese exporter demand was also likely to support the yen against the dollar at key levels such as 100 yen.
The Australian dollar rose 1.8 percent to $0.6861.
With the rise in Asian shares improving risk appetite, the Aussie brushed off the Reserve Bank of Australia lowering its economic growth forecasts for the next two years.
The RBA has slashed its key cash rate by 200 basis points since September, taking it to a three-year low of 5.25 percent. (Additional reporting by Kaori Kaneko; Editing by Sophie Hardach)