* Yen slips, pulls back from 1-year high vs euro
* Traders cover shorts in euro, high yielders
* Euro rises vs dollar, but Greece concerns limit gains
(Adds comment, details)
By Naomi Tajitsu
LONDON, Feb 26 (Reuters) - The yen slipped on Friday, pulling back from a strong rally this week as traders covered short positions in the euro and higher-yielding currencies.
Traders granted the euro a reprieve after knocking it to a one-year low versus the yen on Thursday, while a climb in European shares helped the single European currency to hit a session high against the dollar.
"The market was caught short (on euros and higher-yielding currencies), so it's not surprising that we're getting a turnaround," said Ned Rumpeltin, currency strategist at Nomura in London.
"The stabilisation in sentiment as seen in the small recovery in stocks is also helping."
Still, the euro's gains were limited at the end of a week which saw volatile intraday movements, and many in the market expect it to remain under selling pressure due to mounting concerns about Greece's fiscal problems.
By 1054 GMT, the euro <EURJPY=R> was 0.7 percent higher on the day at 121.60 yen, clawing back after falling as low as 119.66 yen on electronic trading platform EBS on Thursday, its weakest since February 2009.
The euro is poised to fall roughly 2.5 percent against the yen this week, according to Reuters charts.
Against the dollar <EUR=>, the single European currency rose 0.4 percent to $1.3620, helped by a 0.9 percent rise in European shares <.FTEU3>.
This suggested investors were creeping back into risky assets after a sell-off in such positions on Thursday, when weak U.S. data on jobs and manufacturing raised speculation that the global economic recovery is on shaky ground.
The yen fell across the board, trimming gains after benefitting earlier this week from jitters about the global economic recovery, which prompted investors to pick up the low-yielding currency.
The yen tends to depreciate against higher-yielding currencies when risk demand is buoyant.
Sterling <GBP=D4> fell to a session low of $1.5234 after revised figures on UK growth for the fourth quarter showed the economy contracted by more than expected on a year-on-year basis, despite a stronger-than-forecast quarterly reading.
The high-yielding New Zealand dollar <NZDJPY=R> rose 0.7 percent to 62.02 yen, while the Australian currency <AUDJPY=R> rose 0.5 percent to 79.50 yen. Both currencies recovered after falling to their weakest in around two weeks on Thursday.
"There's been some profit taking against the yen, given its good rally this week," said Kasper Kirkegaard, currency strategist at Danske in Copenhagen.
The dollar <JPY=> rose 0.2 percent higher to 89.25 yen <JPY=>, after hitting a three-week trough of 88.80 hit on EBS on Thursday. The dollar index <.DXY> fell 0.3 percent to 80.495.
MORE EURO LOSSES?
Despite the euro's rise on Friday, it stayed close to a nine-month low of $1.3443 hit a week ago and analysts expect more losses on concerns about how Greece will service its debts, and whether it will need support from other euro zone members.
Federal Reserve Chairman Ben Bernanke on Thursday said U.S. regulators are looking into how Wall Street firms helped Athens to arrange derivatives deals that critics say were used to disguise the size of its budget deficits. [ID:nN25251885]
Financing issues facing the country will be in focus ahead of an expected issuance of 10-year government bonds by Greece as it tries to borrow more funds to pay back its debts.
With few major events or data released during European trade, investors awaited a slew of U.S. economic data due during the New York session.
A second reading of fourth-quarter economic growth is due later in the day as well as the Institute of Supply management Chicago's February index of manufacturing activity and the Reuters/University of Michigan poll on consumer sentiment.
A number of Federal Reserve officials will also speak on Friday, after Chairman Ben Bernanke earlier this week said a weak job market and tame inflation warrant low U.S. interest rates for an extended period.
(Editing by Jason Neely, John Stonestreet)