* 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, when a thaw in credit markets pointed to a recovery in investor risk appetite.
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.
"The Dow rose and there were some moves toward taking risk, and that tends to trigger dollar selling," said Hiroshi Yoshida, a currency trader for Shinkin Central Bank.
"But it is not as if risk taking will continue to increase unabated," Yoshida said, adding that concerns about the outlook for the global economy were likely to keep investors cautious.
The dollar index rose 0.3 percent from late U.S. trading on Tuesday to 84.773, after falling around 2.5 percent on Tuesday for its biggest one-day drop in 13 years.
The dollar inched up 0.2 percent against the euro to $1.2960 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. The dollar was steady against the yen at 99.78 yen after slipping to 99.45 yen earlier.
Dollar selling by Japanese exporters and profit-taking was likely behind the dollar's earlier dip against the yen, traders said.
Currency traders were focusing on the outcome of the U.S. presidential election, and how equity markets would react to the results.
With Democrat Barack Obama leading Republican John McCain in every national poll, the market impact is likely to be limited if Obama were to win, market players said.
"The market is factoring in a win by Obama so there would be no surprise there," said Yoshida at Shinkin Central Bank. "But a win by McCain could lead to dollar selling, at least in the short term," he said.
This is because Obama is seen as favouring more drastic economic stimulus measures than McCain, Yoshida said.
As the first polls began to close in the U.S. presidential race, television networks projected that Obama and McCain split an early pair of states.
As expected, Obama captured Vermont and McCain won Kentucky as polls closed in about a half-dozen U.S. states, television networks projected. (Editing by Edwina Gibbs)