* Dollar/yen steps back after fall of over 4 pct in 2 days
* Risk appetite fades a little
* Bank of Canada in focus later in day
By Jemima Kelly
LONDON, July 13 (Reuters) - The yen clawed back some ground
on Wednesday after recording its biggest two-day falls in almost
two years, as the strong risk appetite that had taken hold
across markets at the start of the week faded a little.
The safe-haven yen had tumbled 4 percent against the dollar
since the start of the week, its worst performance since
November 2014, after Japan's Prime Minister Shinzo Abe's ruling
coalition won a clear victory in upper house elections, fuelling
expectations of more stimulus.
Monday's news that Britain would by Wednesday have a new
prime minister -- current interior minister Theresa May -- and a
bumper U.S. jobs report at the end of last week had also boosted
risk sentiment, which had served to further dent the yen.
Some investors had hoped that former U.S. Federal Reserve
chair Ben Bernanke's meetings with Japanese leaders this week
would herald the adoption of "helicopter money", a term which
Bernanke has in the past mentioned as a way central banks might
finance government budgets to fight deflation.
But the dollar hit a session low of 103.95 yen JPY=
shortly after Chief Cabinet Secretary Yoshihide Suga told a news
conference that it was not true that the government was
considering the policy.
"If we had had clear comments concerning helicopter money
last night then maybe dollar/yen...would have continued to go
higher," said UBS's director of currency strategy Constantin
Bolz, from Zurich.
"But markets were super risk-on in the last two days and
today seem to be giving back a little bit of that, so it makes
sense that dollar/yen gives back a little bit of the gains."
Currencies seen as riskier plays that had rallied sharply on
Tuesday such as the Australian dollar AUD=D4 and the New
Zealand NZD=D4 dollar, which had hit a 14-month high, fell
back.
The dollar was 0.5 percent down by 0800 GMT at 104.175 yen,
while the euro fell 0.7 percent to 115.06 yen EURJPY=R , but
was still up about 3.5 percent so far this week.
While the yen may ease further in the near term, a sustained
drop against the dollar seems unlikely, said Daisuke Karakama,
chief market economist at Mizuho Bank in Tokyo.
"I think these moves are nothing more than position squaring
and will prove temporary," Karakama said.
Later in the day, a Bank of Canada meeting on monetary
policy is in focus. Though analysts are not expecting an
interest rate cut, they think a dovish tone could be struck in
the wake of the vote for Brexit, which could weigh on the
Canadian dollar, which was down 0.3 percent. CAD=D4
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional repoting by Lisa Twaronite and Masayuki Kitano in
Tokyo)