* Dollar strengthens after China Feb exports slump
* Euro, sterling, Australian dollar fall
* Sterling remains pressured as QE kicks off
(Changes dateline, previous Tokyo, and byline, adds quotes, updates prices) By Kirsten Donovan
March 11 (Reuters) - The dollar strengthened against major currencies on Wednesday, reversing early losses after a slump in China's exports in February knocked down the Australian dollar and sparked a renewed bout of risk aversion in currency markets. A fall in European equities also helped support the dollar, which had started the Asian session on the back foot following a rally in U.S. shares on Tuesday on news that Citigroup was profitable in the first two months of 2009.
But investor sentiment remained jittery, with worries about the world economy and banking sector never far from the surface.
News that Swiss bank UBS had increased its 2008 net loss to 20.9 billion Swiss francs ($18.06 billion) from the previously reported 19.7 billion Swiss francs and said it saw earnings at risk for some time, weighed on the Swiss franc and the euro.
The dollar spun around after data showed China's trade surplus shrank to $4.84 billion in February -- much lower than forecasts for a $27.3 billion surplus -- and exports slid 25.7 percent on a year ago.
"The Australian dollar sold off sharply immediately after the data and that set the theme of risk aversion in currency markets," said Christian Lawrence, an FX strategist at RBC Capital Markets.
"China's been weathering the storm better than most Western countries and any signs it is really starting to suffer and global trade finance is declining rapidly doesn't bode well for the West."
Australia has close trade links with China and the Australian dollar fell almost 1 percent at one stage before recovering a little to stand 0.5 percent down on the day at $0.6424. It also fell sharply against the yen.
The dollar climbed 0.21 percent against a basket of currencies to 88.706. It struck a three-year peak on the index last week, at 89.624.
The euro shed 0.1 percent on the day to $1.2657, having touched a two-week high of $1.2823 on trading platform EBS on Tuesday.
The Australian dollar's fall helped the yen rise, pushing it up against the New Zealand dollar, then the euro and the pound, which traders said were also hit by investors repatriating funds from Europe. The dollar slipped 0.2 percent 98.49 yen.
BOE LAUNCHES QE
Sterling was little changed by remained near multi-week lows on lingering concerns about the economy and banking system as the Bank of England prepared to launch its 75 billion pound asset-purchase programme, or quantitative easing.
The pound hit a six-week low against the dollar and was last little changed at $1.3735. The euro was around 5-week highs, 0.03 percent higher at 92.18 pence.
The BoE will start pumping money into the economy on Wednesday with a first purchase of 2 billion pounds of gilts.
Gilt futures have rallied nearly 7 full points since the BoE first announce the scheme last week and cash yields have plunged in the 5- to 25-year maturities the bank aims to buy.
But although many analysts think the scheme will ultimately prove positive for the pound, sterling remains pressured in the short-term.
"While investors wait to see how QE helps the economy, sterling should remain under pressure against the dollar but we still look for relative sterling strength versus the euro amid unresolved euro zone concerns and uncertainty regarding future ECB policies," UBS strategist Gareth Berry said in a note.