* EUR/USD pulls back from 1-month low hit on Greece woes
* Sterling hits near-two month low vs dollar, then recovers
* Currency market awaits UK pre-budget report
(Releads, updates throughout; previous TOKYO)
By George Matlock and Naomi Tajitsu
LONDON, Dec 9 (Reuters) - The euro rose against the dollar on Wednesday, recovering from its lowest in more than a month hit after Greece's credit rating was downgraded, as investors sensed selling in the single currency had been overdone.
Earlier in Asia, the dollar advanced against the euro and a currency basket after Fitch downgraded Greece on Tuesday to below the single-A bracket for the first time in a decade, and prompted short covering in the U.S. currency and the yen.
The euro <EUR=> fell as low as $1.4665 in early trade, its weakest since early November but reversed those losses in Europe on the view that the weak state of Greece's public finances was well known in the market and that the move had overshot. It picked up to trade at $1.4749.
"It could not have come as a major surprise that Greece has fiscal problems. While there is always the risk of another heavily-indebted country being downgraded this year...it looks like the euro will now stabilise at around $1.4700," said Stuart Bennett, senior currency strategist at Calyon in London.
Sterling slid to a near two-month low against the dollar, knocked in the run-up to the UK government's pre-budget report, due at 1230 GMT, which was expected to highlight Britain's dire fiscal position.
In Asian trade, traders had shed higher-risk currencies, including the euro, after ratings agency Fitch cut Greece's sovereign debt to BBB+ from A-.
Analysts said issues surrounding the financial health of Greece, whose economy accounts for around 2.5 percent of the euro zone, highlighted the fact that countries in the 16-country bloc continue to suffer from the global recession.
The euro's fall helped to push the dollar index <.DXY>, which tracks its performance against a currency basket, as high as 76.331, also its strongest since early November, before pulling back to 75.968 by 0938 GMT.
Sterling <GBP=D4> fell as low as $1.6167 earlier on Wednesday to touch its weakest since mid-October. It was last at $1.6303, having recouped earlier losses.
UK Finance Minister Alistair Darling begins his pre-budget report presentation at 1230 GMT. He is expected to raise his forecast for government borrowing from a record 175 billion pounds this year as he admits the recession has turned out to be deeper than forecast in April. [ID:nGEE5B7189] [ID:nGEE5B31L8]
More public borrowing may raise concerns about the possibility that Britain may lose its triple-A rating if does not act to repair the state of its finances soon.
In addition to concerns about Greece, a 0.4 percent fall in European shares <.FTEU3> and anxiety surrounding the health of Dubai's financial sector suggested risk demand remained low.
This pushed up the yen, which tends to benefit from low risk appetite.
The dollar <JPY=> fell 1 percent on the day to 87.43 yen, edging closer to a 14-year low of 84.82 yen hit late last month, when fears of a possible Dubai debt default prompted investors to cut carry trades and risk exposure.
Market participants said gains in the yen were triggered by selling in euro/yen <EURJPY=R>, which fell as low as 128.82 yen according to Reuters data, its weakest in nearly two weeks.
The yen rose even as data on Wednesday showed Japan's economy grew 0.3 percent in the third quarter, sharply less than a preliminary estimate. [ID:nTOE5B800U]
(Editing by Nigel Stephenson)