FOREX-U.S. dollar, yen firm as high-yielders sold off

* USD, yen hold gains as short squeeze continues

* High-yielders slammed as longs pared on profit taking

* Kiwi dives to 3-week lows, RBNZ not as hawkish

By Anirban Nag

SYDNEY, Oct 29 (Reuters) - The U.S. dollar held firm near its highest in more than two weeks on Thursday, while the yen strengthened broadly as investors took profits on a host of growth-linked trades that had been in vogue in recent months.

The VIX indicator .VIX, Wall Street's favourite barometer of market volatility, jumped 12.4 percent on Wednesday, highlighting how skittish sentiment had become towards stocks .SPX and other riskier assets like high-yielding currencies.

The U.S. dollar, traded firm above the 76 mark against a basket of currencies .DXY =USD, pulling further away from a 14-month low of 74.94 on Oct. 21, as short-covering gathered momentum.

The yen JPY= a star performer in the previous session, extended gains, rising to 90.70 per dollar from 90.78 on Wednesday, when it gained more than 1 percent.

Its gains on the crosses were even more impressive as speculators unwound long euro and short yen positions.

As a result, the euro EURJPY=R was down at 133.45 yen, having shed nearly 1.8 percent the day before. Aussie/yen AUDJPY=R was also pulled down, diving to 81.41 yen with stops triggered around the 82.90 yen level.

"This all resembles position squeeze more than fundamentals," said Alan Ruskin, chief international strategist at RBS Securities."If we are more serious that this is being triggered by a more negative view on global growth, then the pound and yen's gains won't last."

The pound GBP=D4 held its ground, at around $1.6380, helped broadly by an unwinding in short positions against the euro EURGBP=. The euro EUR= was subdued at $1.4714, having lost more than 1.5 percent in the past two trading sessions.

Investors are likely to stay wary ahead ahead of third-quarter U.S. gross domestic product (GDP) data later on Thursday.

Data this week from the U.S. has raised questions about a sustained recovery with consumer confidence dipping to recessionary levels and new home sales falling unexpectedly.

Analysts expect the U.S. economy to expand 3.3 percent annualised in the third quarter [ECONUS]. Anything lower could trigger another wave of selling in riskier assets, much like the shock GDP numbers from the UK did last week.

"To some extent the U.S. dollar has the possibility of winning on any meaningful GDP data surprise," RBS's Ruskin added. He said a weak number will be positive for the U.S. dollar which tends to gain when concerns about an economic recovery rise.

On the other hand, stronger data could also help the dollar on a belief the Federal Reserve will move to lift rates earlier than expected.

Meanwhile, the Kiwi NZD=D4 extended its slide after the Reserve Bank of New Zealand (RBNZ) dropped its easing bias, as expected, but faced down market pressure for a rate rise as soon as early 2010 with its promise to hold rates low for longer. [nSYD80874].

The kiwi fell to $0.7219, from around $0.7275 before the RBNZ announcement. It slid more than 2.6 percent on Wednesday, the biggest daily fall in nearly five months.

The Aussie AUD=D4 broke under support at $0.9075 to trade near three week lows at $0.9000, with bets for a steep rate hike early next week pared. (Editing by Wayne Cole)