* Dollar index rises after Tuesday's tumble
* Investors eye U.S. election result
* Profit-taking, Japan exporters support yen
By Masayuki Kitano
TOKYO, Nov 5 (Reuters) - The dollar rose against a basket of major currencies on Wednesday after posting its biggest one-day slide in 13 years the previous day, as investors awaited the outcome of the U.S. presidential election.
A win by Democrat Barack Obama would be in line with market expectations and neutral to positive for the dollar, while a win by Republican John McCain would be seen as a surprise and could trigger some dollar-selling, traders said.
Trading activity was light, with short-term speculators sticking to the sidelines as they awaited the outcome, market players said.
"Until the bulk of the presidential election results become clear, trading is likely to stay light," said Tokichi Ito, deputy general manager for Trust & Custody Services Bank's foreign exchange team.
"If Obama gets some of the closely contested states and wins by a broad margin, and the Democrats gain a majority in both the House and the Senate, that could lead to some euphoric buying of the dollar," Ito said.
Such results could make it easier for the new administration to adopt more active economic policies and be seen as positive for the dollar, he said.
The dollar rose 0.5 percent against a basket of major currencies to 84.971 after falling around 2.5 percent on Tuesday for its biggest one-day drop in 13 years.
The dollar rose 0.4 percent against the euro to $1.2925 on trading platform EBS.
The dollar slid 3 percent against the euro on Tuesday, for its biggest one-day slide versus the euro since the launch of the single European currency in 1999, according to Reuters data.
A candidate must get 270 electoral votes to win the U.S. presidency. McCain was set to win 103 electoral votes according to the latest projections by U.S. television networks, and Obama was seen winning 149 votes.
A rally in European and U.S. shares and a decline in dollar funding costs helped spur buying of higher-yielding currencies against the dollar and yen on Tuesday, market players said.
Position squaring ahead of the U.S. presidential election also likely contributed to the broad falls in the dollar and the yen on Tuesday, they said. The dollar was steady against the yen at 99.70 yen. Traders said dollar selling by Japanese exporters and profit-taking helped lend support to the yen.
"The market is factoring in a win by Obama so there would be no surprise there," said Hiroshi Yoshida, a currency trader at Shinkin Central Bank. "But a win by McCain could lead to dollar selling, at least in the short term," he said.
That is because Obama is seen as favouring more drastic economic stimulus measures than McCain, Yoshida said. (Editing by Michael Watson)