* Safe-haven yen rallies across the board, U.S. yields fall
* Risk appetite hit after poor German data, IMF forecast
* Tighter U.S.-Japan 2-yr yield spread seen weighing on dollar (Adds details, quotes)
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, Oct 8 (Reuters) - The safe-haven yen stood tall on Wednesday, having risen broadly as risk appetite waned in the wake of a plunge in German industrial output and after the IMF cut its global economic growth forecasts for a third time this year.
The dollar traded at 108.335 yen after sliding to a three-week low of 107.82 yen, further recoiling from a six-year high of 110.09 set a week ago. The euro dipped to its lowest in a month to 136.50 yen before edging back to 136.90.
Data on Tuesday showed German industrial output fell 4.0 percent in August from July, the biggest decline since the height of the financial crisis.
At the same time, the IMF nudged its global growth forecast down to 3.3 percent for this year from 3.4 percent, warning of weaker growth in core euro zone countries, Japan and big emerging markets such as Brazil.
Slightly at odds with the IMF, Bank of Japan Governor Haruhiko Kuroda remained upbeat on Tuesday about the economic outlook and shrugged off the need to expand the bank's already massive stimulus program.
The disappointing German data, combined with the gloomy IMF forecast, knocked European and U.S. stocks sharply lower.
Safe-haven U.S. Treasuries rallied strongly, sending yields sliding again. The 10-year yield fell as far as 2.337 percent, bringing into view a 14-month trough of 2.303 percent set in August.
The USD/JPY pair tends to track U.S. yields quite closely, partly because of the prevalence of carry trades where investors borrow yen at low rates to buy U.S. assets.
"Markets looked to be searching for reasons to take back risk off the table as they factor in the reality of some global growth slowdown and still present geo-political risks," said David de Garis, senior economist at National Australia Bank.
"They found it in the form of another downside data surprise from Germany with its weaker industrial production report and then a global growth downgrade from the IMF in their latest World Economic Outlook."
Dollar bulls are being forced to temper their enthusiasm for now, particularly as yields have showed no inclination to rise even in the face of last Friday's solid non-farm payrolls report.
"The dollar losing a yen a day seems too fast. That said, the dollar's surge from September onwards was overdone. When considering the tightening of two-year yield spread between U.S. and Japanese debt, we should not be surprised to see dollar weaken further versus the yen," said Masafumi Yamamoto, market strategist for Praevidentia Strategy in Tokyo.