* Yen up as China implements previously ordered ratio rise
* Dollar also gains on risk aversion
* But yen off highs as S&P cuts Japanese govt debt outlook
* Euro earlier hit 9-mth low, dollar 1-mth low vs yen
By Jessica Mortimer
LONDON, Jan 26 (Reuters) - The yen gained broadly on Tuesday after China implemented a planned increase in required reserves for some banks, sparking falls in equities and a move out of the euro and higher-yielding currencies.
Increased risk aversion also lifted the dollar against most currencies other than the yen. But the Japanese currency came off its highs after Standard and Poor's cut its outlook for Japanese debt, citing reduced wriggle room on fiscal policy and disappointment with the new government's budget consolidation plans.
The outlook cut sparked knee-jerk yen selling, which was later tempered as some analysts stressed that Japan runs a current account surplus and is not heavily reliant on international investors.
The euro came off its lowest levels in nine months against the yen but it remained around half a percent lower on the day, while the higher-yielding Australian and New Zealand dollars were still down around 1 percent.
Increased risk aversion sparked selling in positions funded by the low-yielding yen, while higher-yielding and commodity-related currencies are sensitive to any hints that China may be putting the brakes on its economy.
China's central bank told the banks that need to raise their reserve ratios to implement the change on Tuesday, banking sources said, prompting falls in equities.
Adding to investor risk aversion, recent data including a sharper-than-expected fall in U.S. existing home sales have rekindled concerns about the extent of the global recovery.
"Clearly data has started to disappoint and we have China tightening. This could pan out to be more of a sustainable period of risk aversion and a pause in the global recovery scenario," said Carl Hammer, SEB currency strategist.
"This will weigh on commodity currencies as investors move out of pro-cyclical and into pro-defensive currencies," he said, adding the yen and the U.S. dollar would be the main beneficiaries.
At 0854 GMT, the dollar fell 0.2 percent against the yen to 90.04 but it was off a one-month low of 89.53 yen on the EBS trading systems, while the euro fell 0.6 percent to 126.76 yen, off a nine-month low 126.12 yen.
The euro fell 0.4 percent against the dollar to $1.4097, while the dollar index gained 0.3 percent to 78.391.
Investors were awaiting the latest Ifo survey on the German business climate for clues on how Europe's largest economy is faring.
The higher-yielding Australian dollar fell 0.9 percent against the U.S. dollar to $0.8960 and by 1.1 percent against the yen to 80.68 yen.
"The mood in the market is bleak and the environment clearly seems to be shifting away from one of taking risks," said a trader for a major Japanese trading firm in Tokyo.
He said the yen's rise and falls in equities were a resumption of moves toward risk reduction seen last week, that were triggered by factors such as jitters over a White House proposal to curb risk-taking by banks.
European shares were down around half a percent in early trade.
Earlier, the Bank of Japan kept interest rates unchanged at 0.1 percent as widely expected, though it predicted a slightly slower annual pace of price falls.
Bank of Japan Governor Masaaki Shirakawa said on Tuesday there was no change in the central bank's stance of keeping monetary policy very easy.
(Reporting by Jessica Mortimer)