* Yen firms broadly on banking woes
* Yen near 13-½ year peak vs dlr, 7-year high vs euro
* Sterling resumes fall after rebounding on G7 comment
By Satomi Noguchi
TOKYO, Jan 22 (Reuters) - The yen held near a 13-1/2-year peak hit against the dollar and a seven-year high struck versus the euro the previous day, buoyed by growing investor anxiety about global banking woes.
Sterling edged back towards a 23-year low hit against the dollar on Wednesday, erasing gains made after a source told Reuters the currency's slide would be discussed at the next meeting of the Group of Seven industrialised countries in February.
Sterling has come under severe pressure this week as a government rescue package for struggling British banks failed to reassure investors or stem losses in banking stocks. At one point on Wednesday, the pound plunged to $1.3620, its lowest since 1985.
U.S. bank shares erased some of their losses made earlier in the week and fuelled a Wall Street rally on Wednesday, helping Asian stocks cling to small gains.
But that did little to soothe worries about global financial sector fragility and investors continued to shift funds into the perceived safety of the yen and the dollar.
"Sterling still looks far from hitting a bottom with mounting expectations for further and bigger interest rate cuts from the Bank of England to combat the quickly deteriorating economy," said a senior trader at a Japanese trust bank.
The Bank of Japan is expected to unveil details of how it will scoop up commercial paper to ease the credit crunch at the end of its two-day policy meeting later in the day, but is widely seen holding interest rates at 0.10 percent.
Traders said expectations for further shrinking interest rate gaps between Japan and European countries gave the yen additional strength against sterling and the euro.
The dollar was down 0.5 percent at 89.00 yen. It had rebounded from Wednesday's low of 87.10 yen, the lowest since July 1995.
The euro dropped 0.5 percent to 115.95 yen, falling back towards the seven-year trough of 112.08 yen. It was nearly flat at $1.3025.
Japan's top currency bureaucrat, Naoyuki Shinohara, said he was carefully monitoring foreign exchange markets after the yen's advance to multiple-year highs. But Shinohara refrained from elaborating on the chance of Japan intervening in the market to stem the yen's surge by saying "no comment on intervention".
Traders said comments on the currency from U.S. Treasury Secretary-designate Timothy Geithner also suggested the likelihood of Japanese intervention had diminished somewhat, giving the yen a boost.
Geithner said major U.S. trading partners should operate flexible exchange rate regimes, adding that President Barack Obama would press China to let market forces play a larger role in setting the value of its currency.
"A consensus has formed in recent years among G7 countries to support a flexible exchange rate regime, and that currency policy is an international matter unlike monetary policy which is left to individual countries," said Tohru Sasaki, chief forex strategist at JPMorgan in Tokyo.
"That would make Japan difficult to intervene on its own," Sasaki said.
The pound stabilised to trade flat at $1.3947 after slipping as low as $1.3840 earlier in the day.
Sterling rebounded sharply in late overseas trade on Wednesday when France's economy minister, Christine Lagarde, said the Bank of England should take more steps to support sterling.
Earlier on Wednesday, the decline of sterling had gathered steam after shares of Barclays Plc tumbled by as much as a third in value to a 24-year low in London on fears that it needs to raise funds or could be nationalised.
Sterling dropped 1 percent to 123.88 yen but held above a record low of 119.36 yen touched the previous day.
(Editing by Brent Kininmont)