* Euro backs off 10-month high of $1.4283 hit post-Fed
* Dollar index edges off 11-month low but rebound small
* Dollar/yen slips after BOJ keeps asset fund size steady
By Charlotte Cooper
TOKYO, Nov 5 (Reuters) - The dollar paused near fresh lows on Friday after breaking down to a new 2010 trough against a basket of currencies, but investor appetite for risk was expected to continue and grind the low-yielding greenback down.
The dollar index hit an 11-month low on Thursday in the aftermath of a decision by the Federal Reserve to buy government bonds, opening the way for a possible test of its 2009 low of 74.17. It edged up on Friday but still looked vulnerable.
The euro was holding above $1.4200 after soaring as far as $1.4283, its strongest since late January, while the dollar pared small early gains on the yen, edging closer to its 1995 postwar record low of 79.75 yen.
The Fed's commitment this week to open-ended purchases of Treasuries, implying low funding costs, has renewed the focus on the dollar as a funding currency for purchases in commodities, emerging markets and higher-yielding currencies.
Highlighting the risk-on sentiment that has characterised markets' reaction to the Fed's plan to pump in more money, share markets around Asia rose on Friday, while gold hit a record high and palladium a nine-year high.
One senior trader at a bank in Hong Kong said the money flowing into higher yielders and Asian markets was real investment flow rather than short-term speculative funds.
"I think there's still quite a lot of money sitting in cash around the world and people realise that you've just got to be invested so that cash has to find a home somewhere," he said.
"It's generally going to end up in equities and people are worried about the inflationary implications of QE over the long term, so I think money is going out of bonds into equities as well."
The dollar stood at 80.82 yen, up 0.1 percent from late New York levels but well within range of its latest 15-year low of 80.21 set on Monday and perilously close to the record low.
The Bank of Japan concluded a policy review without easing policy further after the Fed's decision and the yen firmed slightly after the announcement on slight disappointment there was no expansion to its asset buying plan in response to the Fed.
Analysts expect some weakening in Japan's economic indicators ahead and some say more easing through asset-buying will be needed.
"Yen strength feels as if it is coming home to roost," said Robert Rennie, chief strategist at Westpac in Sydney. "Now is the time for the BOJ to start to stand up and deliver."
On the crosses, the yen lost ground this week against the euro and the Aussie dollar, falling to its lowest since May at 82.15 yen per Australian dollar on Thursday.
A fall in yen option volatilities has helped boost the crosses, as it encourages carry trades by suggesting less risk of currency market swings, a trader at a European bank said.
One-month dollar/yen option volatility has fallen after the Fed decision but it still remains above the levels seen earlier in the decade, and the latest rise in cross/yen was more likely a knee-jerk reaction to falling volatilities than a real increase in carry trade flows, the trader said.
U.S. monthly jobs data is in focus later in the day, after the Fed's asset-buying decision was accompanied by a pledge to review the programme regularly "in light of incoming information" and adjust it to better foster employment and price stability.
Economists in a Reuters poll expect 60,000 jobs were created in October after 95,000 were lost in September. Brian Kim at UBS said numbers broadly in line with its forecast for a rise in nonfarm payrolls of 70,000 were unlikely to help the dollar at the moment.
"But if the data surprises strongly on the upside, the dollar could temporarily strengthen and both risk-seeking positions and dollar shorts could face some profit-taking into the weekend," he wrote in a client note.
The euro was steady at $1.4207. Traders report options barriers at $1.43 and bids around $1.4200-$1.4220.
Technical strategists also flagged as next targets the $1.4370 area, a 78.4 retracement of the euro's fall from November to June, and then $1.4580, the euro's January high.
The Australian dollar was flat at $1.0151 after climbing as far as $1.0177, a 28-year peak. The central bank, which raised rates by 25 basis points this week to 4.75 percent, sounded upbeat in quarterly remarks but offered no surprises. (Additional reporting by Masayuki Kitano and Hideyuki Sano; Editing by Michael Watson)