FOREX-US dollar steadies as risk aversion eases

* Yen slides as stocks gain, high-yielders rise

* US dollar underpinned by funds demand by month-end

* U.S. 3Q GDP declines less than expected (Updates prices, adds quotes, changes byline)

By Wanfeng Zhou

NEW YORK, Oct 30 (Reuters) - The U.S. dollar rose against the yen on Thursday, but was little changed against the euro, after gains in world stock markets and an interest rate cut by the Federal Reserve on Wednesday helped ease the recent flight into the dollar.

Adding to pressure on the yen was growing speculation that the Bank of Japan will cut interest rates by a quarter percentage point on Friday.

The U.S. dollar also edged higher against the euro in late trade, although it pared most of its gains, fueled by month-end demand from fund managers seeking to square their books or rebalance their portfolios.

"Currently, U.S. dollar moves are largely reflecting equity trading and vice versa, with the dollar and equities dominated by swings between risk aversion and risk appetite," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

"The yen faces additional risks as the BoJ decides whether to cut interest rates," he added.

In late trading in New York, the dollar climbed 1.2 percent against the yen to 98.60 yen , extending its recovery from a 13-year trough just below 91 yen touched on EBS late last week.

The euro was down 0.2 percent at $1.2930 in volatile trade, pulling away from intra-session highs at $1.3300, but well above a 2-1/2-year low of $1.2329 hit this week on electronic trading platform EBS.

Fund managers worldwide are expected to buy substantial amounts of dollars as the month-end approaches to neutralize hedges because of the reduction in their portfolios.

"People are looking at the month-end tomorrow and the market is expecting massive demand for dollars," said Richard Franulovich, senior currency strategist at WestPac Banking Corp. in New York.

DOLLAR DEMAND STAYS

The Intercontinental Exchange's dollar index, which measures the dollar's value against six other major currencies, was up 0.1 percent at 84.652.DXY.

Data released earlier showing a smaller-than-expected contraction in the U.S. economy in the third quarter underpinned sentiment on risky assets, including higher-yielding currencies.

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