* Euro up 0.4 percent vs dlr as euro/sterling nears record high
* European shares down 2.3 percent, capping risk demand
* Market awaits ZEW survey at 1000 GMT, sentiment seen low (Changes byline, releads, updates throughout, previous TOKYO)
By Naomi Tajitsu
LONDON, Nov 11 (Reuters) - The euro rose against the dollar and the yen on Tuesday as traders brushed off a slide in share prices and focused on the single European currency's rally, nearing a record high against a broadly weaker sterling.
The UK currency fell broadly, pushing its value on a trade-weighted basis to its lowest in 12 years on concerns that the UK economy will suffer even as the government bails out the banking sector and plans fiscal measures to boost growth.
The euro was well supported in early trade, but weak global shares kept a lid on risk demand before German data due later in the day which was expected to show ongoing pessimism about the euro zone economy.
European shares fell 2.3 percent in early trade, capping euro gains, and analysts said that investors would likely continue to dump risky assets, including assets denominated in currencies like the euro and sterling, which would likely keep the dollar supported.
"The market is trying to define its range and once that range is decided the next step is to work out which direction to move in, and the bias is still towards dollar strength," said Divyang Shah, chief strategist at Commonwealth Bank of Australia in London.
The euro rose 0.4 percent to $1.2787, supported by a 0.4 percent climb against sterling to 81.94 pence, near a record high of 82.98 pence hit on Monday.
The single European currency had slipped as low as $1.2677 in Asian trade after regional shares took a hit on worries about weak U.S. earnings as the global economy faces a recession.
Sterling was steady against the dollar at $1.5605, after falling as low as $1.5558. The UK currency suffered against the euro, and to a lesser extent the dollar, which pushed it to 84.6 against a basket of currencies, its weakest level since September 1996.
YEN BOOSTED
Against the yen, the single European currency inched up around 0.2 percent to 125.05 yen.
Despite its slide against the euro, the Japanese currency rose against sterling and the Australian dollar as higher yielders remained under selling pressure due to ongoing jitters about the global economic outlook.
This kept demand high 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 supported against the dollar, which fell 0.2 percent to 97.85 yen.
The German ZEW survey due at 1000 GMT is expected to show that investor morale has stayed low in November after plummeting well beyond expectations last month. Forecasts for economic sentiment are for a reading of -62, little changed from -63 in October.
Analysts anticipate a weak reading, which will add to evidence that the euro zone economy. This has cranked up calls for the European Central Bank to keep cutting interest rates following a 50 basis point easing to 3.25 percent last week.
The ZEW survey will land ahead of a reading of third-quarter euro zone growth figures due later in the week, which many expect will show that the region's economy is in a technical recession -- two consecutive quarters of negative growth.
"Going forward, we expect growth conditions in the euro zone to keep on weakening, with further easing in rates to come, and under such conditions the EUR will likely remain under pressure," UBS analysts said in a research note.
ECB council member Guy Quaden on Tuesday was quoted by media as saying that the central bank expects to cut growth and inflation forecasts substantially next month, suggesting that the ECB acknowledges economic weakness.
The comments came after ECB President Jean-Claude Trichet on Monday said that the central bank does not rule out the possibility of cutting rates further next month, keeping expectations high that further monetary loosening lies ahead.
(Editing by Andy Bruce)