* Dollar/yen dips as risk aversion lingers, stocks extend decline
* Low US yields cap dollar firmly
* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
By Shinichi Saoshiro
TOKYO, Dec 6 (Reuters) - The dollar dipped against the safe-haven yen on Thursday amid a spike in risk aversion, as equities continued their retreat on concerns about growth in the world’s largest economy.
The U.S. currency dipped 0.2 percent to 112.98 yen, handing back some of the modest gains made overnight.
Global equity markets have been shaken and the dollar fell this week after an inversion in a part of the U.S. Treasury yield curve triggered market concerns about economic growth.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2 percent and Japan’s Nikkei lost 1 percent.
The spread between the two-year and five-year Treasury yields inverted this week and the two-year/10-year spread was at its flattest in more than a decade amid a sharp fall in long-term rates.
A flatter curve is seen as an indicator of a slowing economy, with lower longer-dated yields suggesting that the markets see economic weakness ahead.
The 10-year Treasury yield fell to a three-month low of 2.885 percent on Tuesday and last stood at 2.920 percent.
“The dollar could remain under pressure until this month’s Fed meeting as long-term Treasury yields may not be able to mount a rebound until the market sees the Fed’s stance on policy and the economy,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.
“The recent reaction to the U.S. yield curve inversion appears a little hysterical, but the dollar will not be given the all clear sign until the Fed meeting is hurdled.”
Fed policymakers are due to gather at a Dec. 18-19 meeting, at which the central bank is widely expected to raise interest rates. Focus is on how many rate hikes the Fed could for 2019.
Also adding to global market jitters on Thursday was the arrest in Canada of a top executive of Chinese tech giant Huawei Technologies, fanning fears of further tensions between China and the United States.
The euro was little changed at $1.1346 after retreating from this week’s high of $1.1419 scaled on Tuesday.
The Australian dollar was down 0.2 percent at $0.7256 .
The Aussie was on a shaky footing after shedding nearly 1 percent the previous day on weaker-than-expected third quarter Australian gross domestic product data.
The pound was a shade lower at $1.2719.
Sterling had sunk to a 17-month low of $1.2659 on Tuesday after parliamentary setbacks for Prime Minister Theresa May but clawed back some of those losses on a more positive outlook for Brexit. (Editing by Sam Holmes)