* Euro nearly flat vs dollar; yen rises broadly
* European shares down 2.5 percent, capping risk demand
* German ZEW index improves to -53.5, beating expectations
* Sterling hits record low vs euro, trade-weighted sterling 12-yr low (Adds comments, updates prices)
By Tamawa Kadoya
LONDON, Nov 11 (Reuters) - The dollar and yen were broadly supported on Tuesday on a weak tone in equity prices, which prompted investors to shun riskier assets.
The euro was flat against the dollar, its gains from a better-than-expected reading in a key German indicator survey erased as the single currency was weighed down by weakness in European share prices.
"There is still the risk aversion factor which is supporting the dollar and yen but it is not quite as much as before, as currencies are settling into ranges," said Daragh Maher, currency strategist at Calyon in London.
Shares in European markets fell after tumbles in Asian shares and on Wall Street overnight. European shares were down 2.5 percent.
The euro briefly rose after the ZEW Institute's index of German economic sentiment came in at -53.5 in November, improving from -63.0 in October. It also beat market expectations for a reading of -62.0.
"The ZEW survey was a little better than expected, which has taken some pressure off the euro," Calyon's Maher said.
At 1133 GMT, the euro was largely flat at $1.2732 after hitting a low of $1.2677 in Asian trade.
But the outlook for the euro was not bright.
"We expect growth conditions in the euro zone to keep on weakening, with further easing in rates to come, and under such conditions the euro will likely remain under pressure," UBS analysts said in a research note.
Meanwhile, sterling was battered as it fell to its lowest in 12 years on a trade-weighted basis and hit a record low against the euro on concerns that the UK economy will suffer even more than the euro zone economy.
Benchmark UK interest rates at 3.0 percent are also now lower than key euro zone rates at 3.25 percent, and some speculate the Bank of England will continue to make more aggressive rate cuts compared with the European Central Bank, widening the interest rate gap further.
The euro hit a record high against sterling of 82.14 pence, according to Reuters data while the pound fell 0.5 percent against the dollar at $1.5527.
Trade-weighted sterling fell to 84.6, its weakest level since September 1996.
YEN BOOSTED
Against the yen, the euro edged lower by 0.2 percent to 124.55 yen.
The Japanese currency also rose against sterling and the Australian dollar as global economic worries kept up the pressure to reverse carry trade positions, where low-yielding currencies like the yen are used to buy assets in higher-yielding ones.
The Japanese currency was down 0.1 percent against the dollar at 97.88 yen.
The dollar and yen are perceived as less risky currencies during times of market stress, and market participants said they may also be supported by the fallout on developing and emerging markets from the global financial crisis.
Russia's central bank on Tuesday let the rouble weaken against a euro/dollar basket beyond the 30.41 level it has defended in recent months, spurring speculation of further gradual depreciation. (Additional reporting by Naomi Tajitsu; Editing by Ruth Pitchford)