* Aussie drops vs dollar and yen after RBA rate cut
* RBA cuts rates by bigger-than-expected 75 bps
* Focus on ECB, BoE rate decisions later this week
* Market awaits U.S. presidential election
By Kaori Kaneko
TOKYO, Nov 4 (Reuters) - The yen rose broadly and climbed over two percent against the Australian dollar on Tuesday after Australia's central bank caught investors off guard with a bigger-than-expected rate cut. The Reserve Bank of Australia cut its key benchmark cash rate 75 basis points to 5.25 percent on Tuesday, surprising market players who had been expecting a 50 basis point cut, as it battled to save the economy from a global recession.
Australian dollar fell against the dollar and yen after the RBA rate cut, which stirred talk that the European Central Bank and the Bank of England may also cut interest rates more sharply than expected later in the week.
Traders said the yen's rise against the Australian dollar helped the Japanese currency to strengthen against other higher-yielding currencies.
"The focus is now on the central banks move in Europe, especially the European Central Bank. Surely, there is a possibility that the ECB and the Bank of England may conduct larger than expected rate cuts," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.
Kato, however, added that the market's reaction to such possible rate cuts was not easy to predict.
"The market may take them as a sign that the deterioration of the economy is severe or it may welcome rate cuts as steps to handle the crisis," he said.
The Australian dollar fell around 2.4 percent against the yen to 65.43 yen according to Reuters data, and was down around 2 percent against the dollar at $0.6627
The euro fell by as much as 1.5 percent to 123.43 yen on trading platform EBS after the RBA's rate decision, but later trimmed its losses to stand at 124.35 yen down 0.8 percent on the day.
That euro fell to a 6-½ year low of 113.62 yen on EBS in late October, as fears of a global recession prompted investors to abandon risky assets and unwind carry trades, which used the low-yielding yen to buy higher-yielding currencies and assets.
The dollar slipped 0.5 percent to 98.62 yen
Traders said the dollar may have a hard time rising above the psychologically important 100.00 yen level in the near term as Japanese exporters were seen likely to sell dollars to repatriate their profits near that level.
Many exporters are assuming a dollar/yen exchange rate of 100 yen in their business plans for the fiscal year ending in March, they said.
US ELECTIONS, MONETARY POLICY
Ahead of the rate decisions by the ECB and the BoE this week, investors also await the results of the U.S. presidential election on Tuesday.
Democrat Barack Obama has led the presidential race in every national opinion poll since late September, but Republican John McCain is still hoping to pull off a historic upset.
"The deterioration of the U.S. economy will be a bit slower if Obama wins, as a change in the ruling party is likely to help Americans become more hopeful for the future," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
Even so, a victory by Obama is unlikely to change the dollar's long-term slide against the yen, Uno said. The U.S. currency may fall back towards a 13-year low of 90.87 yen, which was hit late in October, before the year ends, he said.
Mosts economists polled by Reuters last week said the ECB would lower interest rates by 50 basis points to 3.25 percent at its rate decision on Thursday.
Most economists polled by Reuters also expect the Bank of England to lower interest rates by 50 basis points. A Reuters poll last week showed that 51 of 62 economists expected a 50 basis point cut, with the remainder bracing for an even bigger rate cut.
The euro fell 0.4 percent to $1.2600 and sterling fell 0.9 percent to $1.5675 Central banks around the world have been lowering interest rates, with the U.S. Federal Reserve having cut interest rates by 50 basis points to 1.0 percent last week. The Bank of Japan lowered interest rates to 0.3 percent from 0.5 percent on Friday in its first rate cut in seven years. (Additional reporting by Rika Otsuka and Masayuki Kitano)