FOREX-Yen jumps as investors fret over US bank stress tests

* Source says Bank of America deemed to need more capital

* Yen jumps sharply vs Aussie, euro, as risk taken off

* Aussie, euro and others were already under pressure

By Charlotte Cooper

TOKYO, May 6 (Reuters) - The yen climbed steeply on Wednesday, jumping more than 1 percent versus the Aussie and euro, after a source said Bank of America (BAC.N) was deemed to need more capital, prompting investors to shed riskier positions.

The market was already pocketing profits from bets this week against the yen and the dollar when a source familiar with the U.S. bank stress test results said Bank of America was believed to need an additional $34 billion in capital. [ID:nN05520304]

The news deepened losses in the euro, Australian and New Zealand dollars and also prompted the dollar to fall against the yen, which has been used to fund positions in commodity-related currencies in recent weeks as investor confidence has picked up.

"It's really caught the market in a mood of cautiousness and that's exacerbated the pullback in some of the riskier currencies," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

Although Bank of America has been at the top of the list of banks believed to need more capital in the stress test results expected late on Thursday, the $34 billion is higher than published reports had speculated the largest bank might need.

Stocks fell on the news with S&P futures SPc1 falling 1 percent. [ID:nSP394978]

"It definitely is more. That's what's hit now -- it's the sheer size of the additional capital that's being speculated on," Kotecha said.

The euro EUR= fell 0.4 percent on the day to $1.3274 EUR= after touching its highest in a month at $1.3439 on trading platform EBS on Tuesday.

It shed 1.2 percent to 130.37 yen EURJPY=R, well below at three-week high of 132.87 yen set on Monday.

One trader said the market had been overextended in its long postions on currencies such as the euro and Australian dollars, hence the extent of the pullback. Trading was also a little thin with Japan shut until Thursday for Golden Week holidays.

The dollar fell 0.6 percent to 98.25 yen JPY= although its index on a basket of six currencies .DXY strengthened 0.2 percent to 84.307, up from a five-week low on Tuesday.

Commodity-linked currencies such as the Australian AUD=D4 and New Zealand dollars NZD=D4 have benefited as investor confidence has grown that the worst of the global recession may be over. Both were under profit-taking pressure before the Bank of America news after the Aussie hit seven-month highs this week.

The Aussie shed 0.7 percent on the day to $0.7361 and 1.4 percent to 72.32 yen AUDJPY=R. The kiwi fell 1 percent against the yen.

U.S. Federal Reserve Chairman Ben Bernanke on Tuesday sought to soothe market worries about the stress tests, saying many banks which tested as deficient on capital could bolster their balance sheets through private sector funding. [ID:nN05459483]

San Francisco Fed President Janet Yellen said the U.S. recession could end in the second half of the year but was not like to give way to a robust rebound. [ID:nN05517211

The market is also wary ahead of Thursday's policy announcements by the European Central Bank (ECB) and Bank of England (BoE).

The ECB is expected to cut its main interest rate to a record low of 1 percent, while the BoE is seen holding rates at 0.5 percent, also a record low.

But, more importantly, markets want to see if the ECB suggests it will keep cutting rates or adopt quantitative easing measures, following the Fed's footsteps, to stimulate growth. (Additional reporting by Anirban Nag in Sydney; Editing by Jan Dahinten)