Yen rises as global recession fears erode confidence

* Yen rises versus dollar and euro

* Investors remain worried about global recession

* Fears for future of U.S. automakers hurt sentiment

* Asian shares fall despite Wall Street rally

TOKYO, Nov 19 - The yen rose against the dollar and euro on Wednesday as investors continued to fret over a deepening global recession and sought safety in the Japanese currency, while Asian shares tumbled despite a rally on Wall Street.

Fears about the future of U.S. automakers darkened investor sentiment as top executives at General Motors, Ford and Chrysler warned Congress that their industry was teetering on the brink of disaster.

"Market players are watching how stock markets react to developments (at U.S. automakers)," said Shuichi Kanehira, a senior trader at Mizuho Corporate Bank.

"Any negative news or comment about their future will support the yen," Kanehira said.

GM and Chrysler have warned they could run desperately short of cash in the coming months without a $25 billion aid package they are seeking despite political opposition.

The automakers spoke in Congress as Treasury Secretary Henry Paulson reiterated his opposition to diverting funds from a $700 billion financial bailout programme to rescue Detroit on doubts about the automakers' ability to repay the money and on general resistance to spending more taxpayer money on corporate bailout.

But analysts warn that bankruptcy at one of the "Big Three" U.S. automakers would touch off a cascade of failures that would cost tens of thousands of jobs and make the economic downturn even steeper.

That would deal a fresh blow to the world economy with the euro zone and Japan already in recession in the third quarter.

"We may see the worst of the U.S. economic deterioration from here on, and that could mean more safe-haven buying on the yen," a trader at a Japanese bank said.

The dollar fell 0.6 percent from late New York trade to 96.42 yen after rising above 97 yen in early Asian trade on a late gain in U.S. share prices.

The euro slipped 0.7 percent to 121.62 yen, off earlier highs around 122.70 yen as regional stocks fell with Tokyo's Nikkei share average sliding 2.3 percent.

Aversion to risk usually benefits the yen as investors who have borrowed it at low interest rates to finance investments elsewhere in risky carry trades are forced to buy it back to cover their positions.

The single European currency was nearly flat against the dollar at $1.2617 as more grim U.S. economic data on housing sector -- a root cause of the credit crisis -- kept nervous investors to stick to relative safety in the greenback.