FOREX-Profit-taking lifts euro; pound dips on debt warning

* Investors stay jittery over euro zone debt crisis

* Euro hits lifetime low vs Swiss franc

* Fed says Europe's debt woes no big threat to U.S.

* Sterling slips on Fitch's UK debt warning (Updates prices, adds Fed comments, detail)

By Steven C. Johnson

NEW YORK, June 8 (Reuters) - The euro rose on Tuesday as investors booked profits a day after the currency hit its lowest level against the dollar since early 2006, and the pound fell after a ratings agency urged Britain to cut its deficit.

The euro also hit an all-time trough below 1.38 Swiss francs but rebounded sharply in late morning, with traders citing Swiss National Bank intervention to weaken the franc. The SNB declined to comment. For details, see [ID:nWEA5363].

Against the dollar, the euro rose above $1.20 after tumbling to $1.1876 on Monday, its lowest level since March 2006. But analysts said the market was still anxious about debt levels in several euro zone countries and debt auctions this week from Portugal and Spain.

"The euro decline isn't over," said Marc Chandler, senior strategist at Brown Brothers Harriman in New York. "There are supply concerns this week, and what we're seeing now is a brief respite. A rise above $1.20 would be a good chance to sell."

The euro was last up 0.7 percent at $1.1998 , near a $1.2006 session peak, according to Reuters data. Analysts said it also saw support after euro zone ministers made final arrangements Monday to set up funds for countries facing debt problems. It was up 0.7 percent at 109.58 yen .

The euro has shed 16 percent against the dollar this year, and some economists fear this will hurt U.S. exports to to the euro zone, a fear Chicago Federal Reserve President Charles Evans downplayed on Tuesday. [ID:nNLL8HE65V]

SWISS SPECULATION, UK DEBT WORRIES

Earlier, the euro skidded to a lifetime low below 1.38 Swiss francs but bounced abruptly to around 1.3820 francs, still down 0.3 percent, with traders citing SNB intervention to weaken the Swiss currency.

Switzerland's central bank has intervened in currency markets since 2009 to prevent excess franc strength but slowed its euro purchases recently as the euro fell below 1.40 francs.

"Certainly the price action minutes ago seemed to suggest intervention. though we've no official confirmation," said one market participant at a U.S.-based bank.

Sterling fell 0.4 percent to $1.4407 after Fitch Ratings said the UK was facing a "formidable" fiscal challenge and said Britain's public debt ratio had climbed more quickly than those of other top-rated sovereign credits. [ID:nWLA5820]

"It's more of the contagion fear that's been gripping markets for months now," said John Doyle, strategist at Tempus Consulting in Washington.

The dollar was flat at 91.26 yen . Earlier, new Japanese Prime Minister Naoto Kan chose a fiscal conservative as his finance minister. Kan has in the past advocated a weaker yen to help Japanese exports and fight deflation, but Chandler said that might be wishful thinking as long as markets are in crisis mode.

During times of risk aversion, the yen tends to rise as investors exit positions in riskier currencies and assets.

On Monday, technical analyst Robert Prechter told the Reuters Investment Outlook Summit in New York that the euro is likely to bottom out against the dollar within two weeks.

In the meantime, though, Citigroup strategists said they expect risk aversion to continue to hold sway in markets. [ID:nN07198050]

A widening gap between Spanish and German 10-year bonds and a close Monday in the CBOE Volatility Index <.VIX> above a key technical level suggest an "anti-risk environment in the days ahead," they wrote in a note to clients, which should pressure the euro and boost U.S. Treasury yields. (Additional reporting by Naomi Tajitsu in London; Editing by Kenneth Barry)