* Easing in risk aversion leads yen lower
* Higher-yielding currencies in demand on risk appetite
* Trade subdued with U.S. markets closed
By Kaori Kaneko
TOKYO, Jan 19 (Reuters) - The yen fell broadly on Monday as a rally in share prices helped calm investors' risk aversion, boosting higher-yielding currencies such as the Australian and New Zealand dollars.
Investors' anxiety about the ailing U.S. financial sector slightly receded on government aid for the sector, lifting U.S. shares and reducing safe-haven flows into the dollar and yen.
Market participants also took heart in news that Britain will throw its banks another multibillion pound lifeline on Monday by allowing them to insure against steep losses and guaranteeing their debt.
But analysts said the currency market was cautious about the sustainability of gains in share prices as the global economy is still in a severe situation. Trade was also quiet as financial markets in the United States are closed on Monday for Martin Luther King Day.
"The currency market lacks direction and is moving within limited ranges. Gains in U.S. shares were within the range of rebounds and the U.S. financial sector still faces difficult times," said Yousuke Hosokawa, treasury department senior manager at Chuo Mitsui Trust and Banking Co.
Bank of America and Citigroup both reported multibillion dollar quarterly losses on Friday and Citigroup said it would split into two operating units.
Tokyo's Nikkei share average advanced 0.8 percent but further gains were capped by worries about the economy and the outlook for corporate earnings.
The MSCI index of Asia-Pacific stocks outside Japan climbed 1.4 percent.
The dollar rose 0.3 percent from late New York trade on Friday to 90.97 yen, the highest in more than a week.
The euro climbed 0.6 percent to 121.33 yen, the highest in a week. Against the greenback, it rose 0.3 percent to $1.3340.
The dollar index, which measures the value of the greenback against a basket of six major currencies, was down 0.7 percent at 83.639.
Traders were also keeping to the sidelines ahead of U.S. President-elect Barack Obama's inauguration on Tuesday.
"There have been expectations for the new administration. The issue is the actual details of the economic stimulus package," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking. "The market can be volatile as not everyone is sure about the details."
Obama is considering setting up a government-run bank to acquire bad assets clogging the financial system, a person familiar with the Obama team's thinking said on Saturday.
Higher-yielding currencies such as the Australian and New Zealand dollars, widely seen as a gauge for risk appetite, advanced.
The Aussie rose 0.9 percent to $0.6793 and against the yen gained 0.4 percent at 61.76 yen.
The New Zealand dollar rose 0.8 percent to $0.5524 and 0.4 percent to 50.22 yen. (Reporting by Kaori Kaneko; Editing by Chris Gallagher)