* Shanghai Composite index slides 3%
* China stock fall dampens economic recovery hopes
* Aussie cuts gains to 11-month high vs dollar
By Satomi Noguchi
TOKYO, Aug 14 (Reuters) - The Japanese yen rose broadly on Friday, rebounding from earlier losses versus higher-yielding currencies after Chinese shares dropped and prompted investors to reverse their investments in riskier assets.
The Australian dollar cut earlier gains to an 11-month high against the dollar as the Shanghai Composite index fell 3 percent at one point, reminding investors about the risk of a sudden mood change after the previous day's upbeat eurozone growth data boosted economic recovery hopes.
"Economic strength in Europe and the U.S. is driven by their exports to emerging countries, principally China," said Kosuke Hanao, head of treasury product sales at HSBC in Tokyo.
Hanao said he believed that investors are more likely to add to their holdings of risky assets such as stocks this summer after Federal Reserve Chairman Ben Bernanke this week presented an optimistic economic outlook, boosting confidence that the recovery will continue into next year, which in turn will mean gradual slides in the dollar and yen.
But the biggest risk to his view was China stocks, Hanao said. "If Chinese stocks start falling, doubts about the sustainability of economic recovery in emerging countries will likely reign."
The dollar fell 0.3 percent against the yen to 95.25 yen, pulling away from an eight-week high of 97.79 yen hit late last week on trading platform EBS.
A trader for a Japanese brokerage house said the dollar was carrying over its weakness against the yen from the previous day, when the greenback fell on data showing a surprise dip in U.S. total retail sales in July.
Some traders said gains in the dollar against the yen could be limited in the near term, due to the potential for fund repatriation by Japanese investors related to $27 billion in coupon payments on U.S. Treasuries due on Aug. 15. In addition, $61 billion in coupon securities mature on the same day.
The euro slipped 0.2 percent to $1.4261, giving back some of the gains it made on Thursday when data showed that Germany and France unexpectedly returned to growth in the second quarter.
The euro dropped 0.3 percent to 135.83 yen after rising earlier on expectations for yen-selling flows related to the launch of Japanese investment trusts, or "toushin."
The Australian dollar was flat at $0.8428, having retreated after hitting an 11-month high of $0.8479 earlier after the governor of the Australian central bank said normal interest rates for Australia would be noticeably higher than the current 3 percent cash rate.
The Aussie slipped 0.1 percent against the yen to 80.20 yen. (Additional Reporting by Masayuki Kitano; Editing by Joseph Radford)