* Investors look for safety amid Saudi tensions; yen higher
* Analysts say investors cautious but far from panicked
* Euro rebounds vs dollar despite Merkel's allies' electionloss
* Graphic: World FX rates in 2018 (Adds quotes, details, updates prices)By Tommy WilkesLONDON, Oct 15 (Reuters) - The yen hit a one-month high andthe Swiss franc rallied on Monday as rising geopolitical tensionand further falls in equity markets left investors skittish atthe start of the week.
European stocks sunk to 22-month lows amid rising tensionsbetween Saudi Arabia and the West after the monarchy warnedagainst trying to punish it for the disappearance of ajournalist critical of its regime.That added to a number of concerns for markets globally,including rising oil prices, the ongoing Sino-U.S. trade disputeand a humbling election defeat for Chancellor Angela Merkel'sconservative Bavarian allies.
Merkel's allies suffered their worst election result since1950 on Sunday, in a setback that raised tensions within thecountry's crisis-prone national government .The euro, however, was little fazed. It rose 0.3 percent to$1.1592 against the dollar as the greenback sold offagainst a basket of currencies .
Analysts said the euro's fortunes over the next few dayswould be determined in part by the Italian government's annualbudget, which the cabinet is due to approve later on Monday ."I don't think it's (the German election result) a hugepolitical risk, but it does tell you that political risks inEurope are not going away," said Alvin Tan, a currencies analystat Societe Generale.The yen rose as much as half a percent to 111.62 , itsstrongest since Sept. 13. The Swiss franc, which investors alsotend to buy when markets are in flux, rose 0.4 percent againstthe euro to 1.1423 francs and 0.6 percent versus thedollar to 0.9853 francs.Valentin Marinov, head of currency strategy at CreditAgricole, said a "constellation of political risks" was weighingon sentiment and supporting yen and franc buying.
However, he said the moves were limited and did not suggesta "game changer" for currency markets, which have remainedrelatively calm amid recent equity market sell-offs.The Australian dollar , often seen as a barometer ofglobal risk sentiment, shrugged off the mood and rose 0.3percent to $0.7141 against the dollar, suggesting investors werefar from panicked. The Aussie had hit a two-year low of 0.7039on Oct. 5.There were also some signs stock markets were calming inEuropean trading."While the losses being reported are more modest than thoseseen last week, which investors will hope represents somestability and normality returning to markets, it will remain asource of concern for now," said Craig Erlam, market analyst atcurrency broker OANDA.
Sterling dropped 0.2 percent $1.3121 after Brexittalks hit an impasse, before recovering to trade up at $1.3178,propelled higher by the dollar's weakness .The pound fell 0.3 percent against the euro to 88.170 pence . (Editing by Larry King)
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