* USD broadly softer as CNH rallies more than 1 pct
* Sterling supported by optimistic BOE
* Aussie also firmer, briefly hits 71 U.S. cents
By Ian Chua
SYDNEY, Sept 11 (Reuters) - The dollar nursed broad losses early on Friday, having come under selling pressure against the yuan, while sterling received a shot in the arm after the Bank of England downplayed global risks facing the UK economy.
Catching the eyes of many traders overnight was a 1.2 percent jump in the yuan against the dollar, which in turn provided a lift to the Australian dollar - often used as a liquid proxy for China plays.
The greenback was swept lower against a host of other currencies as a result. That left the euro flirting with $1.1300 EUR= , well off a recent low of $1.1087. It climbed to its highest in over a week at $1.1296, where it lingered in early Asian trade.
A month ago, markets took fright after China unexpectedly allowed the yuan to depreciate against the dollar, sparking talk of a global currency war. The move also added to worries about its slowing economy at a time when Beijing was trying to contain a stock market meltdown.
The overnight reversal in the yuan, albeit very modest, had an opposite effect on market sentiment.
"A sharp and sudden rally in CNH dominated interest in early Europe. There was no official announcement (ie intervention), but the rally supported risk appetite into and during the NY session," CitiFX analysts wrote in a note to clients.
The improved sentiment saw Wall Street close higher and weighed on demand for the safe-haven yen. The euro scaled a two-week peak of 136.36 yen EURJPY=R .
Even the broadly softer greenback managed to hold its ground against the Japanese currency and was last at 120.75 JPY= , having swung between 119.98 and 121.38 on Thursday.
Also firmer, the Aussie dollar touched 71 U.S. cents for the first time in nearly two weeks, before edging back down to $0.7079.
Sterling enjoyed a positive session after BOE policymakers felt the threat to the world economy from China's stock-market slump did not signal a slowdown for Britain.
The pound, which scurried to a two-week high of $1.5476 on the bank's optimistic outlook, last stood at $1.5438.
There is nothing in the way of market-moving economic data out of Asia on Friday. Chinese industrial output and retail sales data due on Sunday will set the tone for the markets next week.
(Editing by Richard Pullin)