(Updates rates, comments to U.S. market open; changes dateline,previous LONDON)
* Investors rethink risk as dramatic stock market rallyfalters
* Chinese industrial firms' profits drop 1st time in 3 yrs
By Saqib Iqbal Ahmed
NEW YORK, Dec 27 (Reuters) - The U.S. dollar fell againstthe Japanese yen on Wednesday, giving up most of the gainslogged in the previous session, as worries about widening cracksin global stock markets prompted investors to load up onperceived safe-haven assets.
The greenback advanced against commodity-linked currenciesas oil prices fell toward 18-month lows on oversupply.
Although stocks jumped sharply on Wednesday, sentiment wasdecidedly more cautious on Thursday. European equities .STOXX fell 2.21 percent while the S&P 500 .SPX fell 1.8 percent.
The drop in risk appetite prompted investors to pile intolow-yielding currencies, Minh Trang, senior FX trader at SiliconValley Bank in Santa Clara, California, said.
The dollar was 0.56 percent lower against the Japanesecurrency at 110.73 yen. The yen tends to benefit duringgeopolitical or financial stress as Japan is the world's biggestcreditor nation.
The dollar fell 0.62 percent against the Swiss franc,another perceived safe haven currency.
More broadly, the dollar Index .DXY , which tracks thegreenback versus the euro, yen, sterling and three othercurrencies, was down 0.39 percent
"The dollar has had a great rally this year but it doesn'thave much more in it to go further, especially if you are seeingthe Fed slow down in rates," said Trang.
Last week, the Federal Reserve raised rates for the fourthtime this year but interest rate futures show traders areskeptical the central bank will raise rates at all nextyear.
Data on Thursday showed earnings at China's industrial firmsin November dropped for the first time in nearly three years, asslackening external and domestic demand left businesses facingmore strain in 2019 in a sign of rising risks to the world'ssecond-largest economy.
The gloomy data points to a further loss of economicmomentum as a trade dispute with the United States puts pressureon China.
Reuters reported on Thursday that the Trump administrationwas considering an executive order in the new year to declare anational emergency that would bar U.S. companies from usingHuawei HWT.UL and ZTE000063.SZ products.
The Australian dollar AUD= , seen as a proxy for Chinesegrowth because of Australia's export-reliant economy, fell 0.54percent.
With oil prices falling on Wednesday, the greenback roseagainst commodity-linked currencies. The dollar was up 0.49percent against its Canadian counterpart, while the New Zealanddollar fell 0.34 percent.
The dollar found little support from data showing the numberof Americans filing applications for jobless benefits fellmarginally last week in a sign of labor market strength, withclaims appearing to stabilize after drifting higher in recentmonths.
Sterling held above a three-day low as investors remainedsidelined awaiting another round of Brexit developments, as abroadly weaker dollar offered some support to the strugglingBritish currency. GBP= (Reportingby Saqib Iqbal AhmedEditing by Bill Trott) ((saqib.ahmed@thomsonreuters.com; @SaqibReports; +1 646 2236054; Reuters Messaging:saqib.ahmed.thomsonreuters.com@reuters.net))
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