* Dollar slides broadly, traders cite large dollar sell order
* Weak equities lift yen, Swiss franc
* Euro helped by firmer German inflation data
* Australian dollar reverses earlier sharp losses
By Jessica Mortimer
LONDON, May 29 (Reuters) - The dollar fell sharply on Wednesday, with traders saying a large sell order caused losses against a broad range of currencies and forced many in the market to exit long dollar positions.
Its drop was driven by steep falls against the yen and the Swiss franc as equity markets lost ground, with European shares sliding 1.6 percent.
These currencies are seen as safe havens and usually gain when risky assets like equities fall.
The dollar has reversed some of its sharp gains seen over recent weeks that were spurred by mounting speculation that the Federal Reserve could reduce monetary stimulus. Against a basket of currencies it fell 0.6 percent to 83.630, pulling away from a three-year high of 84.498 hit on May 23.
"Someone started the ball rolling with a large dollar sell order across the board and then just triggered stops in dollar/yen, euro/dollar, the Australian dollar, the New Zealand dollar ... We had many stops on our board which flew through," a London-based trader said.
The dollar lost 1.4 percent against the yen to hit a session low of 100.965 yen, taking it closer to last week's two-week low of 100.59 yen. It was also down 1.4 percent against the Swiss franc.
Falls in equity markets in recent days have caused the yen to recover after it dropped to a 4-1/2 year low of 103.74 yen per dollar last week on expectations of further monetary easing in Japan.
Recent positioning data showed speculators increased long dollar positions to their highest since at least June 2008 in the week to May 21 and increased short yen positions. This allowed the potential for a reversal as investors take profit on those bets.
"There is still scope for dollar/yen to continue lower and we could see a dip below 100 yen level over the next few weeks," said Ian Stannard, head of European currency strategy at Morgan Stanley.
The euro rose 0.7 percent to $1.2948, extending gains after stop-loss buy orders were triggered earlier on the break above $1.2910, traders said.
Further gains would see it target last week's peak of $1.2998.
Analysts said the euro was also supported by data showing a bigger-than-expected rise in German inflation, although the currency's gains might be temporary as the inflation data would not necessarily reduce the likelihood of further monetary easing by the European Central Bank.
The OECD called on Wednesday for the euro zone central bank to take more action to lift the region out of recession.
"Some survey data has been stronger recently and inflation data is on the stronger side which has supported the euro, but I this won't have a lasting impact," Morgan Stanley's Stannard said.
The Australian dollar reversed earlier steep losses which had seen it tumble to a 19-month low of $0.9528 and last traded up 0.2 percent at $0.9634.