* Dollar index at 1-year low, euro at 2009 high
* China data boost economic recovery hopes; shares rise
* Dollar/yen at 7-month low
(Adds comments, details. Changes byline and dateline, previous LONDON)
By Vivianne Rodrigues
NEW YORK, Sept 11 (Reuters) - The U.S. dollar fell to a one-year low against major currencies on Friday as optimism about the outlook for the global economy after strong Chinese data, encouraged investors to favor higher yielding currencies and stocks instead of the safety of the greenback.
Currencies such as the euro, sterling and the Australian dollar rose as stocks rose in Asia and European shares <.FTEU3> headed for a sixth consecutive day of gains. U.S. stock indexes were little changed at the opening.
The U.S. dollar was on track for its steepest weekly decline in almost four months against a basket of currencies and the euro, which hit a 2009 high of $1.4627 earlier.
The U.S. currency, perceived as a safe haven, tends to fall as investor risk appetite increases.
"Dollar selling momentum has picked up with the rise in equities, and some solid data out of China and the U.S. recently," said Win Thin, a currency strategist at Brown Brothers Harriman in New York. "Euro/dollar broke through important key levels this week and the forex market will keep testing new highs on the pair in coming days."
In morning trading in New York, the InterContinental Exchange's dollar index <.DXY., a gauge of the greenback's performance against six other major currencies, was down 0.2 percent on the day at 76.68, having earlier traded down at 76.51, its lowest since late September 2008.
The euro was 0.1 percent up on the day at $1.4603
Solid data out of China added to the view the global economy is on the road to recovery [ID:nPEK13979], while questions about the dollar's long-term value also added to the negative sentiment towards the currency.
A U.S. Treasury official on Friday said it makes sense for China to diversify its huge stockpile of foreign exchange reserves, which analysts said fed the bearish dollar sentiment that has firmly taken hold this week. [ID:nPEK61981].
The dollar was down 0.9 percent on the day against the yen
at 90.91 yen
YEN, RESERVE DIVERSIFICATION
Some analysts said yen strength may reflect the repatriation of profits by Japanese exporters ahead of the end of the first half of the Japanese fiscal year.
They also noted the focus in times of strong risk appetite may now be firmly on selling the dollar, rather than on selling of currencies such as the yen and the Swiss franc which were previously seen as the funding units of choice in carry trades.
In carry trades investors borrow in low-yielding currencies to finance purchases of higher-yielding assets.
"The yen has been surprisingly strong," said Thin at Brown Brothers. "Repatriation and some dollar-funded carry trades may be contributing to its gains."
Sterling rose 0.3 percent to $1.6695, just below a
one-month high of $1.6742
Concerns about central bank reserve diversification returned on Friday after Russia's central bank first deputy chairman Alexei Ulyukayev told Reuters the central bank would like to diversify its basket of forex reserve currencies by adding two or three more. [ID:nL5593402]
(Additional reporting by Jessica Mortimer in London)