* Euro hits five-month low as Greece worries grind
* Strong China growth offers mixed picture for risk trades
* Aussie holds ground near two-week low as dollar index up
By Kaori Kaneko
TOKYO, Jan 21 (Reuters) - The euro hit a five-month low on the dollar, ground down by worries about Greece's deteriorating finances, while the Australian dollar remained on the defensive after strong Chinese data raised the risk of tightening there.
Market players have been paying close attention to China this week, due to fears that Beijing will step in to tighten credit and rein in its rapidly expanding economy.
Investors have been therefore selling currencies leveraged to growth, such as the Australian, New Zealand and Canadian dollars.
Data on Thursday showed China's annual gross domestic product growth quickened in the fourth quarter and inflation accelerated in December, with analysts saying it was only a matter of time before Beijing took more policy steps.
"Gradually tightening to prevent bubbles will be positive for the economy medium- to longer-term," said Jun Kato, senior chief analyst at Shinkin Central Bank Research Institute.
"But since major economies in the world are still struggling over the timing of their exit strategies, speculation about China tightening would raise worries about the impact on the world economy (in the) short term," he said.
The dollar index hit its highest since early September after the data, and the yen, which had gained on Wednesday, gave back some ground.
The euro has fallen steeply this week on fears about Greece's fiscal problems, also dropped directly after the data, hitting $1.4067 on trading platform EBS, its lowest since mid-August.
It pulled back to $1.4097 but was still down 0.1 percent on the day after shedding 1.3 percent on Wednesday.
Traders said the currency market has been wobbly since China increased banks' required reserves last week, but they said the concern should calm down once players judge China's growth is not likely to derail.
"What China is trying to do by taking tightening steps is to maintain control of a fast-growing economy. People may be inclined to adjust their positions in risky assets but not reverse them because of it," a trader for a U.S. bank in Tokyo said.
China is Australia's top trading partner, making the Aussie sensitive to growth expectations for China.
The Aussie edged up 0.3 percent on the day to $0.9131 after fluctuating following the data release. It shed nearly 1.8 percent on Wednesday as high-yielding currencies were sold on worries about what steps the Asian giant would take.
It rose 0.7 percent against the yen to 83.59 yen after falling 1.6 percent the day before.
"A lot of talk since last night about strong China GDP meant the Aussie had been sold enough by the time the data came," the trader said.
The New Zealand dollar however slipped 0.2 percent to $0.7207, shedding earlier gains made after better than expected retail sales data..
The U.S. dollar rose 0.4 percent to 91.58 yen following Tuesday's bullish reversal from support in the 90.35 yen area. Still, traders say, a break above 92.00/05 is necessary to improve its tone.
The euro also made up ground against the yen, inching up from near a one-month low to 129.08 yen. It lost more than 1.2 percent on Wednesday, with critical support around the 128/127 yen zone.
Against sterling, the euro edged up 0.1 percent to 86.64 pence after falling to 86.50 pence on Wednesday, its lowest since last August.
Attention was shifting to U.S. economic data and earning reports later Thursday with the first-time claims for jobless benefits for the latest week and business activity data for January slated.
Companies such as Goldman Sachs and Google are scheduled to release quarterly earnings. (Additional reporting by Anirban Nag in Sydney and Satomi Noguchi in Tokyo; Editing by David Dolan)