* Greek debt woes fuel risk aversion
* Yen gains broadly, hits one-year high versus euro
* Analysts eye further yen strength into fiscal year-end
(Adds detail, comment, updates throughout)
By Neal Armstrong
LONDON, Feb 25 (Reuters) - The euro hit a one-year low against the yen on Thursday as persistent worries over Greece's fiscal position fuelled risk aversion, prompting safe-haven flows into the low-yielding Japanese currency.
Worries over a possible downgrade of Greece's sovereign debt were seen as the trigger, after ratings agency Standard and Poor's said late on Wednesday it may cut Greece's BBB+ rating by one or two notches within a month.
Concerns over Greece and other peripheral euro zone countries' ability to pay their debts have driven the euro down more than 10 percent from its December highs.
The Greek government has proposed spending cuts, prompting tens of thousands of Greeks to strike in protest on Wednesday.
The low-yielding yen was the main beneficiary in Asian trade as risk aversion fuelled a rally in the Japanese currency.
"The yen is in favour against the euro on safe-haven demand, fuelled by risk-aversion on concerns over sovereign debt risks of the peripheral euro zone members. A possible Greek ratings downgrade has added further pressure." said Lee Hardman, currency strategist at BTM-UFJ.
At 1045 GMT, the euro was down around 1.3 percent at 120.60 yen, close to one-year lows of 120.21 hit in late Asian trade. Traders said large option barriers positioned at 120.00 could curb the yen's strength, adding that significant stop-loss orders were lurking below.
Versus the dollar, the euro initially dropped back below $1.3500 and came close to a nine-month low of $1.3445 hit on Friday. It recovered back to 1.3510 in European dealing, aided by Asian sovereign demand.
Higher-yielding currencies such as the Australian and New Zealand dollars also came under heavy pressure versus the yen as traders said Japanese margin accounts were forced into stop-loss driven selling.
The Australian dollar was down more than 1 percent at 79.50 yen, after dropping to 79.17 into European trade. Technical traders noted it had broken below its 200-day moving average at 79.78.
Sterling tumbled to a nine-month low against the yen as worries over the UK economy weighed on the pound.
The yen also gained close to 1 percent against the dollar, though technical traders noted strong support around the day's lows from the base of the Ichimoku Cloud. Japanese bids were noted supporting under 89.30.
"The yen does tend to strengthen when times get tough and I would also say it is likely to remain in favour going into the Japanese fiscal year-end", said HSBC director of currency strategy Paul Mackel.
BTM's Hardman agreed, noting Japanese corporates traditionally repatriate overseas' revenues back to their domestic currency going into the end of the fiscal year on March 31.
The dollar gave back earlier gains versus a basket of currencies to trade flat on the day at 80.837. It had slipped back on Wednesday after Federal Reserve Chairman Ben Bernanke told Congress a weak jobs market and low inflation would likely allow the Fed to keep rates low for "an extended period".
That poured cold water on market expectations that U.S. interest rates would rise sooner rather than later -- a view boosted after the Fed raised its discount rate last week.
(Editing by Susan Fenton)