* Euro jumps nearly 3 pct vs yen, 2 pct vs dollar
* Stock rally, BOJ rate cut expectations fuels yen selling
* Japanese exporter selling caps gains in dollar/yen
By Rika Otsuka
TOKYO, Oct 30 (Reuters) - The euro jumped against the dollar and the yen on Thursday as a recovery in emerging assets helped ease fears about global financial woes, prompting investors to buy back the recently battered European single currency.
The yen fell broadly as a rally in Tokyo share prices and growing expectations the Bank of Japan could cut interest rates this week fuelled profit taking on the Japanese currency's surge this month.
The euro jumped 2 percent against the dollar, rising further from a 2-1/2-year low. Some emerging nations' currencies and shares have gained as global authorities embark on a series of steps to fight the credit crisis.
The euro and other higher-yielding currencies had been hit hard because fund managers dumped a wide range of riskier assets amid market turmoil and shifted their funds to the dollar -- the world's most liquid currency.
"Concerns about emerging countries have eased a bit thanks to global efforts to support them," said a forex trader at a big Japanese bank.
"Market players including hedge funds are selling the dollar, which had been overbought, and are picking up the euro."
The euro climbed 2.0 percent to $1.3220, extending its rebound from a 2-1/2-year low of $1.2329 struck on EBS on Tuesday. The euro earlier hit a high of $1.3300 on EBS.
A $25.1 billion bailout of Hungary by the International Monetary Fund (IMF) and European Union settled nerves in Central Europe on Wednesday, though the regional fallout of the financial crisis looked to have some way to run.
The IMF also approved a short-term financing facility on Wednesday for emerging market economies that have a good economic track record but are having difficulties accessing credit.
The European single currency jumped 2.9 percent against the yen to 129.80 yen after briefly rising above 131 yen. Just last Friday the euro hit a 6-1/2-year low below 114 yen.
The euro and other higher-yielding currencies fell to multi-year lows against the yen last week as fund managers dumped yen carry trades, in which investors use the low-yielding yen to finance purchases of assets offering higher returns elsewhere.
But some market players noted that trade was thin.
"Market activity is subdued, exaggerating price movements. So it's hard to say the trend in the euro has been changed," said Tohru Sasaki, chief forex strategist at JPMorgan Chase Bank in Tokyo.
The dollar rose 1.0 percent to 98.33 yen after briefly climbing above 99 yen. It hit a 13-year trough of 90.87 yen on trading platform EBS late last week.
Gains in the U.S. currency were capped, however, as Japanese exporters sold dollars as it neared the psychologically important 100 yen level. In quarterly results this week, exporters such as Canon Inc and Panasonic Corp said they were assuming a rate of 100 yen for business planning.
Talk that the BOJ could cut interest rates from 0.5 percent have been helping Tokyo share prices to rally this week. Higher shares boost the value of their portfolios, making them less inclined to dump overseas assets in search of profits.
Tokyo's Nikkei share average surged 10 percent to end up just over the 9,000 level, further distancing itself from a 26-year low below 7,000 hit earlier this week.
"The strength in stocks is hurting the yen," said a forex trader at a Japanese trust bank. "But it is not yet enough to warm up investor risk appetite, and people are only buying back what has been oversold."
If the BOJ did cut rates, it would be joining other central banks around the world which have sought to ease the credit tightness that has been hurting the global economy.
On Wednesday, the Federal Reserve lowered interest rates by a half-percentage point to 1.0 percent, the lowest level since 2004. The European Central Bank is also expected to lower its benchmark interest rate, currently 3.75 percent, at a Nov. 6 meeting. (Editing by Edwina Gibbs)