By Harpreet Bhal LONDON (Reuters) - The yen extended broad gains on Wednesday, reflecting heightened risk aversion as investors cut back on investments in higher-yielding assets while global equities fell. Currency moves were subdued ahead of interest rate decisions by central banks in the euro zone, Britain, New Zealand and Sweden on Thursday, with expectations high of aggressive monetary policy easing to counter the threat of deflation. The low-yielding Japanese currency, which hovered near a five-week high against the dollar, drew strength from tumbling share prices as European equities fell 1.1 percent , while U.S. stock futures were slated to open lower. Investors have flocked to the dollar and the yen on the view that the ECB, BoE and other central banks have more scope to cut rates than the Bank of Japan and the Federal Reserve, whose rates are already low. Investors continued to unwind carry trades, where the yen was used to fund purchases of higher-yielding assets. Analysts said the yen would take strength from share prices -- often seen as a barometer of investors' risk appetite -- which suggest that risk aversion remains high. "There is nothing to suggest last week's rally in stocks can be sustained," said Geoffrey Yu, currency strategist at UBS in London. "Very few people want to take on fresh risks and that is not going to help any currency to move strongly against the yen." By 7:14 a.m. EST, the dollar slid 0.2 percent to 93.18 yen, while the euro fell 0.7 percent to 117.81 yen. The euro fell half a percent to $1.2648, struggling after data showed further deterioration in the euro zone services sector. China's central bank entered the domestic foreign exchange market on Wednesday to offer dollar liquidity, which pulled the yuan off the bottom of its daily trading band versus the U.S. currency. However, many in the market believe China is adjusting its currency policy toward moderate yuan depreciation to stimulate the economy. WEAK SERVICES PMI Sterling fell broadly, pushing its level against a basket of currencies to its lowest level since January 1996, after data showed that the UK services sector shrank faster than expected in November. The purchasing managers' index (PMI) for the services sector fell to a series low of 40.1, boosting expectations that the Bank of England may slash rates by a full percentage point from 3.0 percent on Thursday to shore up the domestic economy. Earlier in the day, bleak PMI services data for the euro zone pushed the euro to a session low against the dollar and the yen, as the figure provided further evidence that the single currency region is grappling with a recession. Ongoing signs of economic weakness are seen prompting the European Central Bank to cut interest rates by 50 basis points or even more on Thursday from 3.25 percent at the moment. The market's focus will be centered on how aggressively the ECB and the BoE cut interest rates, as big rate cuts would diminish the yield advantage of their currencies over the low-yielding yen. (Reporting by Harpreet Bhal; Editing by Patrick Graham)

Source