FOREX-Dollar dips as economy hopes sharpen risk appetite

* Wave of Japan funds focused on foreign assets to launch

* U.S. economy seen shrinking 1.5 pct in Q2

By Rika Otsuka

TOKYO, July 31 (Reuters) - The dollar slipped on Friday as growing hopes for a global recovery prompted investors to pick up riskier assets such as stocks, pushing up higher-yielding currencies.

Risk aversion waned on Thursday, with the dollar and the yen coming under pressure and stocks and oil rising on solid U.S. earnings reports and a drop in the number of Americans collecting long-term unemployment aid.

Investor worries about more falls in Chinese shares eased after the Shanghai Composite Index .SSEC climbed for a second day, recovering some of Wednesday's 5 percent loss after a senior central banker reiterated that loose monetary policies would not be reversed. [ID:nPEK348322]

"Investors who trimmed risky positions following a sharp fall in Shanghai shares are taking risks again," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.

The dollar index, a gauge of the greenback's performance against six other major currencies, lost 0.3 percent to 79.048 .DXY, slipping back towards a seven-month low of 78.315 struck on Tuesday.

The euro edged up 0.3 percent from late U.S. trade to $1.4122 EUR=, rising from a two-week low of $1.4007 hit on trading platform EBS on Wednesday.

The dollar fell 0.3 percent to 95.28 yen JPY=, sliding from a three-week high of 95.89 yen reached the previous day. Traders said Japanese exporters sold dollars to repatriate overseas profits.

With the yen seen as more vulnerable than the dollar to waning risk aversion, the dollar could still try 96 yen later in the day if global stocks extend their gains, traders said.

"Share prices are the biggest factor setting the course for the forex market at the moment," said a senior forex trader at a big Japanese bank.

"The current stock rally is likely to persist as investors are now talking about the risk of not holding enough shares in their portfolios," the trader said.

"That is prompting market players to speculate that more Japanese funds will flow into higher-yielding and commodity-linked currencies."

Tokyo's Nikkei share average struck a 10-month intraday high on Friday. [.T]

The euro was unchanged at 134.53 yen EURJPY=R after rising 0.8 percent on Thursday.

The Australian dollar was little changed at 78.82 yen AUDJPY=R, near one-month highs hit around 79.30 yen earlier this week.

Against the greenback, the Australian dollar rose 0.3 percent to $0.8276 AUD=D4.

A wave of Japanese mutual funds will launch on Friday, with 41 "toshins" featuring overseas assets, expected to keep the yen vulnerable against the dollar and higher-yielding currencies such as the Australian dollar in the longer-term.

But in the near term, the rush of toshin launches is expected to have only a limited impact as a rally in global stocks and commodities in the past few weeks has made fund managers cautious about immediately putting money to work, traders said.

Activity was subdued in early Asian trade as investors awaited the U.S. government's advance report on second-quarter gross domestic product at 1230 GMT.

A Reuters poll of economists gave a median forecast of a 1.5 percent contraction in the U.S. economy in the second quarter. [ECI/US]

That would be much less than the 5.5 percent contraction in the previous quarter and would bolster views that the economy is weak but its decline has slowed enough to support talk of stabilisation.

Figures release on Thursday showed the number of U.S. workers filing new claims for jobless benefits rose slightly more than expected last week, but the number of Americans collecting long-term unemployment aid fell to the lowest in three months. [ID:nN30613836] (Editing by Edwina Gibbs)