* Dollar falls against the euro, gains against the yen * Hope of bailout for U.S. carmakers boosts sentiment * Risk aversion likely to remain for some time * 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 8 (Reuters) - The dollar fell against the euro on Monday as talk of an imminent bailout deal for the three U.S. automakers boosted stocks in Europe and Asia and helped to quell extreme levels of risk aversion. The rise of 5 percent in benchmark indexes outside the U.S. sent the low-yielding Japanese yen and U.S. dollar lower against the Australian dollar, sterling and other currencies perceived in the market to have higher risk. Analysts said expectations that a rescue of the "Big Three" U.S. automakers will materialize, along with more stimulus measures from governments around the world was helping to calm a recent sell-off in risky assets which has send yields on three-month Treasury bills to near zero. The "U.S. dollar is sharply lower against the major currencies as markets anticipate a large fiscal stimulus package in the U.S. and a U.S. auto bailout as early as today or tomorrow," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York in a research note to clients. In early New York trade, the euro traded 1.1 percent higher at $1.2877, after jumping as high as $1.2915, its highest level since November 28. The single currency rose 1.6 percent to 120.20 yen, having climbed as high as 120.99 yen, according to Reuters data, as the euro was boosted by higher regional shares. Stock market gains are seen as a sign of easing risk aversion and can curb demand for the yen, which rises when risk-taking declines and carry trades are unwound. "Higher stocks are driving everything at the moment and currencies are trading in line with this, with higher yielders gaining and lower yielders on the defensive," said Adam Cole, global head of FX Strategy at RBC Capital Markets. The equities rally also benefited the pound, which gained 0.8 percent against the dollar to $1.4870, while the higher-yielding Australian dollar jumped 2.5 percent to $0.6637. The Australian dollar, whose 4.25 percent yield for the moment continues to dwarf the yen's 0.3 percent even as the Reserve Bank of Australia continues to slash interest rates, rose nearly 3 percent to 61.90 yen. Against the yen, the dollar traded 0.5 percent higher at 93.32 yen, but off the session high of 93.91 yen. BAILOUT EYED White House and Congressional negotiators sought on Sunday to settle remaining differences over an emergency rescue for the struggling auto industry. Hopes for a bailout gained traction after Friday's disappointing employment figures encouraged U.S. lawmakers to take action to shield the economy from the credit crunch and a global recession. U.S. President-elect Barack Obama also said on Saturday that his plan to create at least 2.5 million new jobs included the largest infrastructure investment since the 1950s and a huge effort to reduce the U.S. government energy use. "President-elect Obama's plans to introduce the largest infrastructure package since the 1950's and progress on an auto sector rescue package have captured the market's imagination and is weighing on the dollar," said Brown Brothers Harriman's Chandler. Despite the dollar's drop on Monday, analysts do not expect the U.S. currency to continue losing ground, as major concerns remain about the possibility of a deep global recession, which many say will keep investors extremely wary of taking on risky positions. "We remain wary about the impact of escalating bad news on the economic front, which we believe will keep risk aversion elevated for some months to come," analysts at Calyon said in a research note. (Additional reporting by Naomi Tajitsu in London) (Editing by Andrea Ricci)

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