* Yen recovers after big drop on Wednesday
* Norway’s crown in focus as c.bank holds meeting
* Aussie rebounds on employment data
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Aug 15 (Reuters) – The yen fell on Thursday as some calm returned to markets following fears that the U.S. economy could be headed for a recession, while the Australian dollar and other currencies hit in the recent selloff rebounded.
Foreign exchange markets have remained relatively calm despite big moves in bond markets, where investors have piled into government debt in anticipation of a global growth slowdown.
But the safe-haven Japanese yen has strengthened as investors looked for safety.
The latest turbulence in financial markets was triggered by an inversion in the U.S. Treasury yield curve for the first time in 12 years, which helped lift gold prices and drove a massive selloff in U.S. stocks and oil.
The inversion, where 2-year yields trade higher than 10-year yields, has historically preceded previous economic recessions.
Sentiment was already fragile after economic data from China and Germany revealed the extent of the damage the China-U.S. trade dispute is causing.
The yen fell 0.3% to 106.22 yen. On Wednesday, the yen rallied 0.8% versus the greenback, its biggest daily gain in two weeks.
“When volatility rises, dollar/yen becomes strongly correlated with Treasury yields, so the currency pair has more room to fall,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities.
The dollar index, which measures its value against a basket of six major currencies, stood at 97.956, unchanged on the day.
The euro edged higher against the dollar, rising 0.1% to $1.1146.
“We see modest downside risks to EUR/USD today stemming from the potential effect of constructive US data on UST (U.S. Treasury) yields (higher) and offsetting the effect of stabilising risk appetite,” ING analysts said in a note.
Elsewhere, the Australian dollar rose 0.5% to $0.6781 after data showed the Australian economy added a forecast-busting 41,100 new jobs in July.
However, reflecting the rising global economic risks, futures still imply an 84% chance of a quarter point rate cut to 0.75% in October, with November seen better than 100%.
Reserve Bank of Australia Deputy Governor Guy Debelle also highlighted the risks from the trade war in a speech earlier on Thursday, saying it could trigger a self-fulfilling global downturn.
Norway’s central bank gives its monetary policy decision at 0800 GMT. The crown was trading 0.3% higher at 9.98 crowns per euro.
Sterling edged higher, hitting $1.2075, up 0.1% on the day . (Additional reporting by Stanley White in Tokyo; Editing by Angus MacSwan)