* U.S. dollar index at 12-month low, euro hits 2009 high
* China data boosts economic recovery hopes; shares rise
* U.S. dollar/yen at 7-month low
* U.S. consumer sentiment improves (Updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 11 (Reuters) - The yen firmed broadly on Friday as a pullback in Wall Street shares and a drop in oil prices negated upbeat U.S. consumer sentiment, rekindling safe-haven demand for the Japanese currency.
The dollar slipped against a basket of currencies, touching a nearly one-year low earlier, as the sell-off continued, on track for its worst weekly performance in more than three months. The greenback also fell to a fresh 2009 low versus the euro, but it recouped most of its losses.
The prospects for economic recovery and low U.S. borrowing rates continued to encourage investors to move cash out of the dollar into riskier assets in other currencies.
"Today we're getting a little bit more action versus the yen and weaker U.S. stocks are helping," said Patrick Brodie, chief FX dealer at Sumitomo Mitsui Banking Corp in New York.
The yen typically benefits when there is heightened risk aversion in the market.
"In the dollar's case, selling has been fairly persistent all week and today is no exception. The euro and the Australian dollar should continue to make new highs next week."
In late afternoon trading in New York, the dollar was down 1.2 percent on the day against the yen at 90.64 yen, having hit a seven-month low of 90.22, according to Reuters data.
Traders say there are option barriers at the 90 yen area, limiting the dollar's downside.
The dollar was down 2.5 percent this week versus the yen.
The euro was also 1.2 percent lower versus the Japanese currency, trading at 132.16 yen.
The InterContinental Exchange's dollar index, a gauge of the greenback's performance against six other major currencies, was down 0.2 percent at 76.678 after falling to 76.457, its lowest in nearly a year.
The euro was little changed at $1.4581, 2 percent higher on the week against the dollar. The euro zone single currency hit a 2009 high of $1.4634 earlier, according to Reuters data.
Investors sold the dollar this week as signs emerged of a global recovery from one of the worst downturns this century. That encouraged investors to leave the perceived safety of the greenback and favor riskier assets such as stocks, emerging markets and commodity-linked currencies.
A report showing improving U.S. consumer sentiment on Friday further added to recent evidence that an economic recovery was picking up speed.
The Reuters/University of Michigan Surveys of Consumers preliminary reading of consumer confidence index for September came in at 70.2, the highest since June.
"Dollar selling momentum has picked up and it is likely to continue for a while," said Win Thin, a currency strategist at Brown Brothers Harriman in New York.
Solid data out of China added to the view the global economy is on the road to recovery.
In addition, questions about the dollar's long-term value added to the negative sentiment towards the U.S. 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.
Sterling, meanwhile, rose 0.2 percent to $1.6675, still within sight of a one-month high of $1.6742, while the New Zealand dollar gained 0.4 percent to US$0.7055. (Additional reporting by Vivianne Rodrigues; Editing by James Dalgleish)