* Dollar index hits 1-1/2 week highs, up broadly
* Euro, commodity currencies suffer big declines
* Growth worries, banks' ratings downgrade sap risk appetite
By Ian Chua
SYDNEY, June 22 (Reuters) - The safe-haven U.S. dollar hovered at 1-1/2 week highs against a basket of major currencies on Friday, staying buoyed following a long-anticipated credit ratings downgrade of the world's major banks by Moody's.
The dollar had staged its biggest rally in over three months overnight as alarm bells rang out after key surveys of business activity from China to the euro zone and the United States darkened the outlook for the world economy.
The dollar index last traded at 82.316, having rallied nearly 1 percent on Thursday. It rose as high as 82.398, reaching levels last seen on June 13.
Against the yen, the greenback climbed to 80.23, after topping out at a five-week high around 80.34.
The moves came after China's factory sector shrank for an eighth straight month, business activity across the euro zone contracted for a fifth month and U.S. manufacturing grew at its slowest pace in 11 months. All of which hit appetite for risk.
As a result, the euro fell to $1.2547, pulling well away from this week's peak of $1.2748 set on Monday. It came close to testing major support at $1.2520, a low carved out on Monday in reaction to initial Greek exit poll results.
Traders said a break of $1.2520 would signal that a top at around $1.2748 has formed, opening the way for a downside test to as far as $1.2290, the low for this month set on June 1.
Commodity currencies were hit hard as well, with the Australian dollar suffering its biggest one-day percentage fall in six months.
The Aussie bought $1.0045, having dropped more than 1.3 percent from Thursday's high of $1.0205. Good support is seen at $0.9979, the 38.2 percent retracement of its June 1-20 rally.
Keeping investors cautious, Moody's late in New York on Thursday cut the credit ratings of 15 global banks including JPMorgan and Morgan Stanley.
Markets had already been bracing for the downgrades, which Moody's had flagged earlier in the year.
If there was any solace to be found, it was that Morgan Stanley's ratings was cut by two notches to Baa1, instead of a bigger three-notch downgrade that Moody's had threatened in February, traders said.
"The focus now turns to the EU FinMin meeting and mini EU Summit of the leaders of Germany, France, Italy and Spain today," analysts at BNP Paribas wrote in a note, adding this meeting should lay the groundwork for the EU leaders summit next week.
"According to two unnamed officials working on the proposal to be presented at the EU leaders summit, the proposal will include a discussion on euro bills, a dept redemption fund and common banking supervision."
BNP analysts said any positive noises from the meeting should reaffirm their expectations for the euro to rise against the greenback from here as the market remained vulnerable to a short squeeze in the euro and a U.S. dollar sell off.
Another relief for the euro on Thursday was a successful sale of bonds by Spain, which managed to raise 2.2 billion euros in the debt market, albeit at a high cost.
There were also reports the ECB was considering easing ratings rules on debt it accepts for repo operations, a move that would greatly help Spanish banks borrow.