* Euro weak, vulnerable to more falls as Greek spreads widen
* 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 on Thursday, as its sell-off on chart triggers and fiscal worries extended, while the Australian dollar held its ground as Chinese growth quickened but the risk of tighter policy also grew.
China has hogged the limelight this week as fears that it will tighten credit and monetary policy drove investors to sell currencies leveraged to growth, like the Australian, New Zealand and Canadian dollars.
Its annual gross domestic product growth quickened in the fourth quarter and inflation accelerated in December, with analysts judging 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 short term," he said.
The dollar index edged up to its highest since early September after the data, and the yen, which gained on the crosses on Wednesday as riskier, growth-leveraged trades were unwound, gave back some ground.
The euro, which has fallen steeply this week on fears about Greece's fiscal problems, dropped in the direct aftermath of the data to $1.4067 on trading platform EBS, its lowest since mid-August.
It quickly pulled back to $1.4090 but was still down 0.1 percent on the day after shedding 1.3 percent on Wednesday.
Traders said the currency market has grown wobblier since China increased banks' required reserves last week but they say once players judge China's growth is not likely to derail or get out of hand, concern about it tightening should calm down.
"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 $0.9128 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 83.55 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.
"After confirming the numbers are within expectations, the market is probably moving to a new chapter of trades."
The New Zealand dollar however slipped 0.1 percent to $0.7210, shedding earlier gains made after better than expected retail sales data..
The U.S. dollar rose 0.3 percent to 91.53 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. (Additional reporting by Anirban Nag in Sydney and Satomi Noguchi in Tokyo; Editing by Joseph Radford)