By Chikako Mogi TOKYO (Reuters) - Risk aversion kept the yen and the dollar firm on Thursday as global recession worries and credit jitters fueled by uncertainty over the struggling U.S. auto industry led investors to cut risk assets and repatriate funds. The dollar and euro were off one-week lows against the yen hit on Wednesday, but traders said the yen remained firm overall as investors were likely to keep unwinding carry trades in which they bought high-yielding assets using the low-yielding yen. The dollar may be vulnerable against the yen due to deepening concerns about U.S. corporate earnings and expectations the Federal Reserve will cut interest rates from the already low 1 percent at a meeting next month, traders said. But the dollar was likely to benefit from general risk aversion triggered by falling stocks and growing uncertainty over whether U.S. automakers, including General Motors, will win emergency government loans. The top three U.S. carmakers have warned that bankruptcy for one or more of them would lead to massive job cuts. "The focus is on GM's fate, and mounting credit market worries could accelerate investors' moves to repatriate overseas investments, supporting the dollar," said Hiroshi Yoshida, a trader at Shinkin Central Bank. "The continuing risk aversion means investors will sell assets for cash, and such position unwinding will also help strengthen the yen against a broad range of currencies," he said. Yoshida said the yen's rise was unlikely to be as sharp as last month, and an immediate challenge of the 90 yen mark was unlikely in the near term. "But the yen is poised for a gradual uptrend and a rise beyond 90 yen is possible over the medium term," he said. The dollar was little changed at 95.75 yen, slightly above a one-week low of 95.66 yen hit on Wednesday, after rising as high as 96.12 yen earlier. The euro was up 0.3 percent at 119.85 yen, also a tad above a one-week low of 119.50 yen hit on Wednesday. The euro edged up 0.2 percent to $1.2516. Trading was subdued, keeping prices in narrow ranges. "Caution persists over credit risks among financial institutions," said Mitsuru Sahara, a senior manager at Bank of Tokyo-Mitsubishi UFJ. "But measures by global central banks to pump in ample funds seem to have calmed down the currency market a little bit," he said. The Nikkei share average extended its falls to more than 4 percent, hitting a three-week low below 8,000, as the yen's strength hit exporters. Japan's exports fell as expected in October, logging the first annual drop in four months, as the global economic slowdown takes its toll on overseas demand for Japanese goods.

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