LONDON, Sept 17 (Reuters) - The yen retreated against the

euro on Wednesday after U.S. authorities came to the rescue of

insurer American International Group, in an attempt to

stem further damage to the global financial system.

The New York Federal Reserve would lend up to $85 billion to

AIG, once the largest insurer in the world, for two years in

exchange for a 79.9 percent equity stake, staving off a

bankruptcy that would have thrown world markets back into

turmoil.

News that British Bank Barclays Plc would buy

several parts of Lehman, whose collapse on Monday sent global

equity markets into a tailspin and boosted risk aversion, also

helped soothed markets.

Stocks rebounded with the U.S. bellwether Dow Jones

Industrial average gaining 1.3 percent overnight and

European stocks up in early trade. Oil jumped

nearly 4 percent towards $95 a barrel.

The low-yielding yen, which had benefited as investors

exited risk assets, retreated from recent highs versus most

major currencies, while high-yielding units like the Australian

dollar climbed off multi-year lows against the yen.

"What we're seeing at the moment is basically a relief

rally," said Tom Vosa, head of market economics at nabCapital.

"The Fed's decision to hold the line last night and the Bank

of Japan probably removed some fears that the ECB or the Bank of

England will be cutting rates earlier."

But analysts warned there is no place for complacency.

"It would be a brave investor who believes the marginal

improvement in risk appetite overnight is the beginning of a

longer trend, especially with the money markets still gummed

up," said Daragh Maher, deputy head of global FX strategy at

Calyon.

"Instead, the conflicting forces of bad U.S. financial

sector news and resultant repatriation flows will likely keep

the USD around current levels."

At 0743 GMT, the dollar was slightly lower at 105.59 yen

On the data front, the Bank of England minutes of its last

policy meeting, euro zone trade data and U.S. housing starts and

building permits are on tap later in the day.

Keywords: MARKETS FOREX Currency bid prices at 0736 GMT. All data taken from Reuters with percent change calculated from the daily U.S. close at 2130 GMT. Last US Close % Chg YTD % 2007 16 Sep. Close ----------------------------------------- Euro/dlr 1.4254 1.4119 +0.96 -2.30 1.4589 Dlr/yen 105.50 105.72 -0.21 -5.24 111.33 Euro/yen 150.43 148.43 +1.35 -7.44 162.53 Dlr/swiss 1.1174 1.1223 -0.44 -1.42 1.1335 Stg/dlr 1.7959 1.7856 +0.58 -9.51 1.9847 Dlr/cad 1.0630 1.0708 -0.73 +6.68 0.9964 Aus/dlr 0.8009 0.7944 +0.82 -8.54 0.8757 NZD/Dlr 0.6635 0.6570 +0.99 -13.45 0.7666 Euro/swiss 1.5930 1.5854 +0.48 -3.68 1.6539 Euro/stg 0.7937 0.7915 +0.28 +8.00 0.7349 Euro/sek 9.5879 9.6272 -0.41 +1.67 9.4304 Dlr/Nok 5.7752 5.8620 -1.48 +6.27 5.4347 Latest forex developments All forex news ... Debt...Indicators... Currency reports.. All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ World central bank news Economic Forecasts... Official rates... Forex Diary....... Top events........ Diaries...........Diaries Index........ Press Digests.... Polls on G7 economies..

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