NEW YORK (Reuters) - More than a year into the global financial crisis, one of economists' worst fears — a collapse in currency values by countries desperate to save their economies from ruin — is becoming a greater risk.

This week, with currencies bouncing around wildly and some hitting multi-year extremes, policy-makers in Japan, Europe and the US all chimed in on exchange rates.

Though not ready to call it an imminent risk, some economists are increasingly afraid that this financial crisis may tempt countries into the sort of "competitive devaluations" that in the past have turned recession into depression.

"It at least raises the spectre of what we saw in the early 1930s, when 'beggar-thy-neighbour' devaluations were quite destructive," said John Ryding, chief economist at RDQ Economics, a New York-based independent research firm.

Then, countries' attempts to devalue their way out of crisis provoked protectionist reactions in other states, who threw up tariffs that squelched trade. That left countries unable to boost their struggling economies with exports.

"It would be a race to the bottom in terms of currency values, and I just don't think that will be beneficial to any of the countries involved," said Omer Esiner, senior market analyst at Ruesch International in Washington.

This week, Japan's finance minister said authorities were on high alert as the yen hovered near a 13-year peak against the dollar while his French counterpart urged the Bank of England to do more to support sterling, which is near a record low against the euro and hit a 23-year low against the dollar.

Switzerland's central bank said explicitly it may resort to unlimited currency intervention to weaken the franc and keep the economy out of deflation.

US President Barack Obama's nominee to head Treasury even put China on alert, saying Obama thinks China has been "manipulating" the yuan, using a term the Bush administration avoided for years to describe Beijing's currency policy.

Exchange rates are almost certain to be on the agenda when global leaders meet at upcoming G7 and G20 meetings, and at next week's World Economic Forum in Davos, Switzerland.

A source told Reuters this week that weakness in the pound, which hit $1.3502 on Friday after trading above $2 last July, would be discussed when G7 leaders meet in February.

While acknowledging the risks, some think the current situation won't devolve into the worst-case scenario.

In the case of Japan and Switzerland, Robert Blake, senior currency strategist at State Street Global Markets, said authorities are not trying to make the yen and franc abnormally weak, but to prevent them from becoming abnormally strong.

That's because both currencies have been lifted by safe-haven flows, the result of investors rapidly unwinding trades that had been financed with cheaply borrowed yen and franc.

"This is coming at a time when like other countries, Japan and Switzerland are facing extreme economic pressures, given the global downturn. So certainly policy-makers are not happy about appreciation of their currencies," Blake said.

But "it's not a matter of devaluation. It's just trying to prevent currency strength. That's perfectly understandable."

Indeed, most countries desire a weaker exchange rate to shelter them as much as possible from a nasty global slump.