* Australian dollar hit by unemployment rise
* Yen higher as stock markets turn lower
* Sterling hanging on outcome of EU summit
By Patrick Graham
LONDON, Feb 18 (Reuters) - Australian dollar was the biggest loser on major currency markets on Thursday, as data there and revived concern about global growth sent stock markets lower and the yen higher against the dollar.
China's yuan, one source of global financial nerves in January, inched lower after data showed producer prices sank 5.3 percent last month. It remained above the level reached against the dollar when the Lunar New Year holiday began two weeks ago.
A bigger-than-expected rise in Australian unemployment offered more evidence of the global weakness that caused the poorest start to a year for stock markets since the 2008 crash. Expectations are growing of further easing by central banks, in which it is difficult to pick the currency winners.
"For currencies like the Aussie, at least some stabilisation of oil prices is a positive, but this is only a relatively short-term effect," said Ulrich Leuchtmann, head of foreign exchange strategy with Commerzbank (DE:CBKG) in Frankfurt.
"I'm sceptical about global central banks' ability to raise inflation, and that suggests they will continue to surprise on the expansionary side. A new round of policy easing is likely."
Expectations that the Reserve Bank of Australia would be pushed to cut interest rates drove the Aussie 0.7 percent lower in early trade in Europe to $0.7158 AUD=D4 .
The day's big set piece is a European Union summit concerned largely with changes sought by British Prime Minister David Cameron before Britain's referendum on EU membership.
The key issues for markets are whether Cameron comes away with a deal, whether he can successfully describe it a "win" to British euroskeptics and whether he swiftly sets a date for a vote.
A number major banks suggested on Thursday that slipping on any of those fronts might see sterling weaken. Analysts from RBC said a successful outcome for Cameron, followed by a June date for the vote, would play out mainly in "vol" options betting on sterling volatility.
"If events pan out as expected, the leaders rubber-stamp the Tusk proposal and Cameron announces a June referendum, it may be neutral for GBP spot but should push up the premium in GBP vol further around the date," they said.
Sterling was steady at $1.4290 GBP=D4 and just over 0.1 percent lower at 77.94 pence per euro EURGBP=D4 .
The dollar fell 0.4 percent to 113.66 yen, having traded around 114.00 yen JPY= through the Asian session. The euro dipped a quarter of a percent 126.99 yen EURJPY=R . Each was above this month's troughs of 110.985 and 125.795, respectively.