* Funding currencies drop as global stocks push higher
* Australian and New Zealand dollars outperform on China reforms
* Easy money, low rates pledge buoy risk sentiment
By Laurence Fletcher
LONDON, Nov 18 (Reuters) - Higher-yielding currencies such as the Australian and New Zealand dollars rose against the U.S. dollar and yen on Monday, boosted by buoyant stock markets as investors cheered China's economic reform plans.
Chinese shares posted their biggest gain in more than two months on Monday, as Beijing announced its most sweeping economic and social reforms in nearly three decades. Global shares hit their highest levels since the start of 2008 .
"Currencies linked to China will receive some support ... although this is not an outright risk-on environment," said Ian Stannard, head of European currency strategy at Morgan Stanley, although he said a rebalancing of the Chinese economy could be a negative for the Australian dollar in the longer term.
The Australian dollar was up 0.4 percent versus the U.S. dollar at $0.9402, while the New Zealand dollar was similarly up at $0.8373. Both also rose against the yen .
Both currencies, which also rose on Friday, tend to perform well when investors are prepared to take on more risk or on better prospects for Chinese growth.
In contrast, the dollar, yen and euro - which offer investors lower yields - were more concerned with the debate over how long central banks will keep monetary stimulus easy.
"Funding currencies, such as dollar, yen and the Swiss franc are soft as investors look for value and yield," said Tom Levinson, currency strategist at ING.
The dollar came off highs last week as the Federal Reserve's chief-in-waiting encouraged faith it would keep it $85-billion-a-month bond purchases intact this year. Most investors now expect the Fed to start paring stimulus only in March 2014, meaning there will be more dollars flushing around.
The European Central Bank has also pledged to keep rates near record lows and may yet take more action while the Bank of Japan is also set to be aggressive in providing monetary stimulus to reach its inflation goal. The BOJ will hold a regular policy meeting this week and is expected to maintain its ultra-loose policy.
The dollar index was down 0.2 percent at 80.709 as some investors trimmed long dollar positions. The dollar was down 0.1 percent at 100.08 yen, while the euro was marginally up at 135.26 yen. The euro was up 0.1 percent against the dollar at $1.3515.
The euro received some support after data showed the euro zone's trade surplus grew more than expected in September.
Morgan Stanley's Stannard also pointed to reform plans for Japanese pension funds, which could weaken the yen.
"The suggestions ... are that we could see some diversification out of JGBs (government bonds) and into higher-risk assets, and allocations overseas, which should put pressure on the yen," he said.
Investors are keeping a close eye on coming U.S. data to gauge the timing of any tapering of the Fed's bond-buying.
A key piece on data, due on Wednesday, is October retail sales. Data on Friday showed currency speculators added to more favourable bets in the dollar and turned even more negative on the yen in the week ended Nov. 12.