* Dlr, yen slide; hope for US auto bailout lifts sentiment
* US could vote on rescue plan as early as Wednesday
* Losses in dlr, yen seen limited, risk aversion stays high
(Changes dateline, byline, adds comment; previous TOKYO)
By Naomi Tajitsu
LONDON, Dec 10 (Reuters) - The dollar and the yen fell on Wednesday as some investors were relieved by a tentative agreement by U.S. lawmakers to rescue stricken automakers.
The euro hit a two-week high against the U.S. currency after Asian shares jumped 3 percent to a one-month high.
Traders have been selling the dollar and the low-yielding yen when stocks gain and market volatility calms, which boosts sentiment and quells demand to dump risky assets.
The U.S. House of Representatives could vote as early as Wednesday on a $15 billion plan to bail out and restructure U.S. automakers but the initiative may face possible roadblocks in the Senate, officials said. [ID:nN09294627].
"There's a feel-good factor in the market ... and that's to do with the new that the bailout package for the U.S. automakers is coming quite close to being finalised," said Phyllis Papadavid, currency strategist at Societe Generale in London.
The euro
Despite the U.S. currency's broad losses, it rose 0.5 percent to 92.62 yen
The euro
Currency volatility slipped, helping to weigh on the dollar and the yen.
One-month implied dollar/yen volatility
A tentative improvement in sentiment cooled a rush to unwind carry trades which had used the yen, whose interest rate is near zero, to fund purchases of higher-yielding assets.
This helped to push the higher-yielding New Zealand dollar
Despite improving demand for higher-yielding currencies on Wednesday, Papadavid at SG said selling of the dollar and the yen would prove short-lived.
"The macro economic reality is unlikely to change in terms of weaker growth outlook ... so we continue to look for both yen strength and dollar strength in the near term," she said.
US BAILOUT IN FOCUS
Traders waited to see whether the U.S. House of Representatives would approve the automaker bailout, which includes conditions to providing low-interest loans to avert a threatened industry collapse if one of them were to fail.
Some market participants are sceptical on whether such a plan, if passed, would actually save the struggling auto sector, while others argue that a rescue will ultimately do little to cure the global recession.
Analysts say a raft of stimulus plans and aggressive interest rate cuts are helping to alleviate some economic pain but that expectations that the global recession may be deeper than initially thought would keep risk aversion low.
"The general improvement in risk appetite is failing to recognise the severity of the economic downturn but combined efforts by policymakers and lawmakers to pre-empt potential risk events is having a positive effect," analysts at UBS said in a research note.
"Nevertheless, the market may yet reach a stage where interest in risk assets cannot be justified by the underlying conditions in the global economy." (Editing by Mike Peacock)
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