* Risk aversion picks up with year-end in mind
* Shares down, emerging market regulation moves eyed
By Charlotte Cooper
TOKYO, Nov 19 (Reuters) - The dollar and the yen rose on Thursday as investors, watching soft equities performances and capital controls in emerging markets, closed out positions in riskier currencies and bought back the two low-yielders.
The higher yielding New Zealand and Australian dollars, which have been favoured plays against both the dollar and yen this year, both fell, dropping 1 percent against the yen, while the euro retraced a chunk of its gains made the previous day against the dollar.
Traders and analysts cited several factors as playing into the move, including yen-buying by Japanese exporters ahead of a three-day weekend, weak share markets and policy issues in New Zealand.
Markets were also watching steps to tighten controls on capital in emerging markets such as Brazil and South Korea, although South Korea said its new measures were aimed at boosting the soundness of banks' assets and not at FX volatility.
"Markets are finding it difficult to get traction," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.
"U.S. equities were softer overnight and momentum for risk is seeping away a little going into the year-end, and it's as if we're seeing a lot of squaring of positions and short covering going into the year end."
The dollar index, a measure of its performance against a basket of six currencies, rose 0.1 percent to 75.278, after dipping to a 15-month low of 74.679 on Tuesday.
The euro fell 0.6 percent to 132.90 yen while the New Zealand dollar fell about 1.4 percent to 65.71 yen and the Australian dollar slid 0.8 percent to 82.32 yen.
Both the Australian and New Zealand dollars have failed to break to new 2009 highs against the yen since hitting the year's peaks in October.
In New Zealand, comments from the main opposition party leader that it would seek to change a policy that sets the central bank's main role as controlling inflation through interest rate moves added to the kiwi's fall.
Analysts said, however, the plan was unlikely to come to much with an election not due until 2011, although alongside the weaker equity markets and a fall in yields, it weighed on the kiwi, which fell 1 percent on the day to $0.7372.
"The world markets have become quite long in kiwi dollar as they have in Aussie. When you have a little scare, it flushes a lot of long positions out," said Imre Speizer, strategist at Westpac.
The Australian dollar slipped 0.6 percent to $0.9236 from $0.9292 in late U.S. trade, well below a 15-month peak at $0.9407 set on Monday. Expectations for a December rate hike have cooled recently, sapping some of the currency's strength.
The euro dropped 0.4 percent to $1.4908. Traders said even though it fell it was caught in a range, with talk of a double-no-touch option at $1.48 and $1.51 to expire on Friday.
The euro climbed more than half a percent on Wednesday but it is struggling to break back above $1.5000 and forge new highs for the year above $1.5064.
The dollar fell just 0.2 percent to 89.13 yen after dipping to its lowest in a month this week at 88.73 yen.
It remains firmly in a downtrend against the Japanese currency stemming back to April this year, and dealers do not rule out a test of its October low of 88.01.
Traders were also looking to see if yen inflows were likely as result of Japanese bank and company capital raisings.
The market will watch U.S. jobless benefit claims for the week ended Nov. 14, due at 1330 GMT, to see if the labour market is stabilising. Economists in a Reuters survey forecast a total of 505,000 new filings compared with 502,000 the week before.
St. Louis Federal Reserve Bank President James Bullard said on Wednesday the Fed may start tightening financial conditions by selling assets it has accumulated rather than raising interest rates.
Bullard also noted that if the Fed followed its past pattern, it would not raise its target for overnight interest rates until early 2012, but also added there were reasons to think it may not wait that long this time.
Sterling fell to $1.6700 and weakened to 89.33 pence per euro after dropping sharply against the euro on Wednesday, when central bank minutes indicated policymakers would keep the UK's ultra-loose monetary policy for the foreseeable future. (Addtional reporting by Mantik Kusjanto in Wellington and Kaori Kaneko in Tokyo; Editing by Hugh Lawson)