* Risk appetite falls; stocks, commodities decline
* Yen gains broadly, Australian, New Zealand dollars fall
* Investors wary that rally in risky assets is excessive (Recasts, updates prices and changes byline)
By Nick Olivari
NEW YORK, Nov 19 (Reuters) - The dollar and yen rallied on Thursday in revived safe-haven demand for the U.S. and Japanese currencies with the pullback in risk appetite illustrated by declines in equity and commodity markets.
The dollar and commodities are often inversely correlated, with gold and oil priced in dollars and seen as an alternative currency and hard asset themselves.
Analysts said investors were turning cautious after recent economic data has not been as rosy as forecast, increasing worries that the sharp rally in risky assets over the past several months may have been overdone.
The yen rallied broadly, hitting its highest level against the euro in more than two weeks, while the higher-yielding, commodity-linked Australian and New Zealand dollars tumbled.
"It's probably a combination of the notion that the global economic data has been going through somewhat of a soft patch recently and the fact that the year-end is approaching," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
In mid-afternoon New York trade, the euro fell 0.4 percent to $1.4911. It remained within the range of a large $1.48 to $1.51 "double no touch" options structure expiring on Friday.
A senior economic adviser to the German government told Reuters Television that Germany could face a double-dip recession in late 2010 or early 2011 as extra public spending is withdrawn.
The single euro-zone currency also slid to a more than two-week low against the yen, according to Reuters data, as losses accelerated after breaking technical support at the 200-day moving average of around 132.00.
The euro later rebounded to 132.58 yen, still down 0.9 percent for the day in volatile trading with almost 2 yen separating the day's high and low.
The dollar fell 0.5 percent to 88.91 yen after hitting a low of 88.64, the lowest level since Oct. 9, according to Reuters data.
"The decline in risk appetite has prompted some squaring of positions particularly in the yen, which was oversold against the majors," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
RISKY ASSETS PULL BACK
The three major U.S. stock indexes fell sharply, down 1.2 percent to 1.8 percent in early afternoon trading. Oil and gold prices both retreated a day after gold hit a record high above $1,150 an ounce.
Investors were also wary of talk from emerging market countries about capital controls to limit some of the hot money flows into their economies, with new steps announced by Brazil and South Korea.
The ICE Futures U.S. dollar index, a non-traded calculation measuring the greenback's performance against a basket of six currencies, rose 0.2 percent to 75.31. The index hit a 15-month low of 74.679 earlier this week.
Some 10,379 contracts changed hands in the December dollar index futures, with average daily volume year to date at 8,286, and the futures last at 75.425. Open interest was posted at 40,085.
Federal Reserve officials on Thursday downplayed the consequences of the falling U.S. dollar, underscoring that deflation is still a threat, especially with commercial real estate prices falling.
A survey on Thursday showed factory activity in the U.S. Mid-Atlantic region grew in November for a fourth straight month, which was faster than expected, but that was not enough to offset general economic gloom.
The Australian dollar fell to a two-week low and last traded 1.2 percent lower at US$0.9182. The New Zealand dollar lost 2.1 percent to US$0.7304. (Additional reporting by Jessica Mortimer in London) (Reporting by Nick Olivari and Wanfeng Zhou; Editing by Jan Paschal)