* Yen rises, shares slide worldwide on risk aversion
* Sterling falls on weak services PMI
* Market awaits rate decisions from ECB, BoE
* For up-to-the-minute market news, click on FXNEWS (Updates prices, adds quotes, changes byline, changes dateline,previous LONDON)
By Nick Olivari
NEW YORK, Dec 3 (Reuters) - The yen extended gains across the board on Wednesday, reflecting heightened risk aversion as investors cut back on investments in higher-yielding assets while stocks fell around the world.
Currency moves were subdued ahead of interest rate decisions on Thursday by central banks in the euro zone, Britain, New Zealand and Sweden, with expectations high of aggressive monetary policy easing to counter the threat of deflation.
Investors have flocked to the dollar and the yen on the view that the ECB, BoE and other central banks have more scope to cut rates than the Bank of Japan and the Federal Reserve, whose rates are already low.
"We speculate that the market is particularly nervous over the ECB decision tomorrow," said Stephen Malyon, senior currency strategist at Scotia Capital in Toronto in a note to clients. "The discrepancy between what many believe the ECB should do, and what it is expected to do, has produced plenty of discord between economists over the outcome."
While the consensus ECB call is for a 50 basis point cut to 2.75 percent, there are many economists expecting a 75 basis point cut, and a not-insignificant number thinking the ECB could deliver a 100 basis point cut, Malyon said.
In early New York trade, the dollar slid 0.6 percent to 92.83 yen
The low-yielding Japanese currency, which hovered near a five-week high against the dollar, drew strength from tumbling share prices as European equities fell 1.6 percent , while U.S stock futures .DJc1 slated a lower market open.
Investors continued to unwind carry trades, where the yen was used to fund purchases of higher-yielding assets. Analysts said the yen would take strength from share prices -- often seen as a barometer of investors' risk appetite -- which suggest that risk aversion remains high.
The euro
Earlier in the day, bleak PMI services data for the euro zone pushed the euro to a session low against the dollar and the yen, as the figure provided further evidence that the single currency region is grappling with a recession. [nL3261302].
WEAK SERVICES PMI
Sterling fell broadly after data showed that the UK services sector shrank faster than expected in November [ID:nL2553471]. Sterling was last down 1.1 percent against the dollar at 1.4746
The purchasing managers' index (PMI) for the services sector fell to a series low of 40.1, boosting expectations that the Bank of England may slash rates by a full percentage point from 3.0 percent on Thursday to shore up the domestic economy.
A report from ADP Employer Services showing U.S. private employers cut 250,000 jobs in November, the most in seven years and more than the 200,000 expected, had little impact on foreign exchange markets.
"The ADP report is a volatile gauge but the headline figure of 250,000 seems consistent with deep economic recession and that's where we are at this point," Kurt Karl, chief U.S. economist at Swiss Re in New York.
China's central bank entered the domestic foreign exchange market on Wednesday to offer dollar liquidity, which pulled the yuan off the bottom of its daily trading band versus the U.S. currency [ID:nSHA303595].
However, many in the market believe China is adjusting its currency policy towards moderate yuan depreciation to stimulate the economy. (Additional reporting by Vivianne Rodrigues in New York and Harpreet Bhal in London, Editing by Chizu Nomiyama)
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