* China says Europe remains key investment market
* Kuwait, South Korea say no plan to reduce euro assets
* High-risk currencies gain as stocks, commodities climb (Adds quotes, updates prices)
By Wanfeng Zhou
NEW YORK, May 27 (Reuters) - The euro rose broadly on Thursday after China said Europe remains a key investment market for its foreign-exchange reserves while a global stocks rally buoyed risk appetite.
China's central bank said a Financial Times report on Wednesday that Beijing was concerned about its euro zone bond holdings was groundless. The report had driven the euro to a near four-year low against the dollar earlier in the global session. For more, see [ID:nTOE64Q04P]
Strong gains in European <.FTEU3> and U.S. shares <.SPX> also helped support the euro, while the yen came under broad pressure as investors put on riskier bets funded by cheap borrowing in the Japanese currency.
"In general, we're seeing an unraveling of yesterday's action," said Tim O'Sullivan, chief dealer at Forex.com in Bedminster, New Jersey.
"We're following the equity markets. The dollar/yen started to gain some traction ... and that's dragging the whole risk trade up, which is giving another boost to the euro," he said.
In late New York trading, the euro <EUR=EBS> traded 1.6 percent higher at $1.2364, well of a session high of $1.2395, according to electronic trading platform EBS. It had earlier fallen to a near four-year low of $1.2154.
Kuwait Investment Authority on Thursday also denied a media report that it is reducing its exposure to euro zone investments and affirmed it is a long-term investor in Europe. [ID:nLDE64Q0XD]
Meanwhile, South Korea's central bank said it has no plans to reduce euro assets in its foreign reserves, the world's sixth-largest. See [ID:nTOE64Q05X]
Analysts said the comments from global reserve managers prompted investors to cover short positions in the euro, which has taken a beating the last few months.
"A lot of this euro rally is due to short-covering given a 'risk on' environment. This is also a relief rally on the back of the Chinese story," said Boris Schlossberg, director of FX research at GFT in New York.
"It's not because investors are more upbeat about the future. I think they are relieved things are not getting any worse and there are no exogenous shocks out there for the time being," he added.
The euro rallied 3 percent against the yen to 112.56 yen <EURJPY=R>, pulling away from an 8-1/2-year low of 108.83 yen hit this week.
The dollar <JPY=> rose 1.1 percent to 90.88 yen.
Thin volume ahead of market holidays in Britain and the United States on Monday exacerbated the moves, traders said.
Despite the denial from China, Alan Ruskin, chief currency strategist at RBS Global Banking and Markets, said "it would be silly" to think that the recent events in the euro zone have not changed and won't change China's behavior at all.
"No serious investor can be inured to the chilling events at the euro's periphery and its repercussions for long-term confidence in the single currency," he wrote in a note.
Higher-yielding, commodity currencies soared as oil prices climbed. The Australian dollar <AUD=D4> rose 3.7 percent against its U.S. counterpart to US$0.8518 and the New Zealand dollar <NZD=D4> gained 3.1 percent to US$0.6839.
Earlier in the session, data showed the U.S. economy grew at a slightly slower pace than previously estimated in the first quarter but the recovery still appeared solid, suggesting the economy could withstand fallout from a European debt crisis. [ID:nN27259780] (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Diane Craft)