* Dollar near 6-wk high as debt crisis keeps investors risk averse * Basis swap spreads, forward rates show dollar funding stress * Euro helped by corporate repatriation, short-covering for now * Some hope for more progress on joint euro bonds * Dollar/yen blips up after misinterpreted Azumi comments By Hideyuki Sano TOKYO, Nov 22 (Reuters) - The dollar stuck near a six-week high against a basket of currencies on Tuesday on a sharp pullback in global risk appetite as the sovereign debt storm intensified on both sides of the Atlantic. Severe dollar funding strains supported the U.S. currency as European banks scramble to secure cash dollars, with the dollar money market seizing up and investors fearing that a fall in euro zone government bond prices could pummel European banks. Commodity currencies such as the Australian dollar bore the brunt of the market's fears, though they recouped some of their heavy losses, while the euro escaped with only modest losses as bears stayed cautious given the already huge bets made against the currency. "There is no fundamental change in the markets' risk averse mood. There's been no clear progress in the euro zone," said Koji Fukaya, chief FX strategist at Credit Suisse. "Given the funding shortage in the dollar, the dollar is unlikely to fall much at least until the end of the year." The dollar index held steady in Asia at 78.34, near a six-week high of 78.516 hit overnight, as European and U.S. stocks skidded and funds fled to Treasuries. Stress in the dollar money market showed no sign of abating, with the cost of swapping the euro and the yen for dollars still on the rise. The one-year dollar/yen currency swap spread rose to a new peak of 77 basis points, surpassing the previous record hit in 2008, while the three-month euro/dollar swap spread rose to 140 basis points, the highest level since late 2008. In a similar sign, the discount for dollar/yen forwards and the premium for euro/dollar forwards kept rising as well. "Everything is reminiscent of the days after the collapse of Lehman Brothers," said a trader at a Japanese bank. The dollar hardly budged after ratings firm Fitch repeated that a failure by a U.S. congressional committee to reach agreement on the country's deficit would likely result in a negative rating action -- most likely a revision of the rating outlook to Negative, rather than a downgrade. "If there was a downgrade of the U.S. credit rating, the dollar would be sold off. But that seems unlikely in the very near future," said Mitsuru Saito, chief economist at Tokai Tokyo Securities. Moody's Investors Service said failure of itself would not lead to a rating change while Standard & Poor's said the news validated its decision to make its first U.S. credit downgrade in August. EYE OF THE STORM In the eye of the storm, the euro held up remarkably well at $1.3487, above a six-week low of $1.3421 hit last week, helped by speculation of more short-covering in the currency. Data from a U.S. watchdog showed last Friday that speculators held large net euro short positions of 76,147 contracts. "Looking at Chicago futures positions, some people might think there will be more short-covering," a trader at a Japanese bank said. Talk of ongoing repatriation of foreign assets by European players has helped put a floor under the single currency and discouraged short-sellers. Some traders wondered if the euro's resilience has mainly been driven by European firms repatriating profits from fast-growing emerging economies ahead of the year-end, rather than banks, which probably need more dollars than euros. Still, the common currency could be under renewed pressure soon unless policymakers come up with drastic measures to stop investors dumping euro-zone government bonds. "Some market players, including myself, are hoping that policymakers break new ground on the joint bond idea this week. If there is no progress on that front, the euro could slip back," said Teppei Ino, a currency analyst at the Bank of Tokyo-Mitsubishi UFJ. The European Commission has set out in a paper to be published on Wednesday how closer monitoring of countries' budgets could in the long run make it possible to issue jointly underwritten euro-zone debt. The dollar got a small lift against the yen after some traders took comments by Finance Minister Jun Azumi as hinting at more intervention by Japan, although he in fact merely stated that huge buying of foreign bonds by the Bank of Japan -- an idea floated by some economists -- would not be in line with government thinking. The dollar briefly rose to as high as 77.35 yen but quickly ceded gains to stay around 77.09 yen. The pair stood at important resistance from their 90-day moving average of 77.09 yen, which has capped the dollar since April apart from a short period after Japan's intervention in August and October. The Australian dollar pared some of its heavy losses incurred on Monday to stand at $0.9847, up 0.1 percent on the day but still below a support-turned-resistance level of around $0.9910, a 61.8 percent retracement of the October rally. The next downside target is seen at $0.9710, a 76.4 percent retracement level.

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