* Dollar, yen slip broadly as share prices rise
* Euro up 1.4 percent at 119.78 yen
* Ease in risk aversion also helps high-yielders
* Eyes on Citigroup, Bank of America earnings
(Adds quotes, updates prices)
By Tamawa Desai
LONDON, Jan 16 (Reuters) - The euro and higher-yielding currencies gained against the dollar and yen on Friday as share prices rebounded, buoyed by optimism after the U.S. government pledged to provide fresh financial aid to Bank of America.
Risk aversion receded somewhat as Wall Street stocks snapped a six-day losing streak to end modestly higher. Tokyo shares followed the move, closing up 2.5 percent.
European shares were up more than 2.0 percent by mid-morning trade.
News that the U.S. government would pump $20 billion into Bank of America eased investor concerns, and also boosted higher-yielding currencies such as the Australian and New Zealand dollars.
"The view that the health of the global financial system remains the underlying, guiding force across financial markets has been underpinned by the price action," said Neil Mellor, currency strategist at Bank of New York Mellon in London.
"Euro/dollar appears well-placed to recoup further ground should current, positive sentiment prevail."
But worries about the banking sector will not be far from investors' minds, as Citigroup and Bank of America are set to announce their earnings results later in the day.
"Obviously, we're approaching a difficult period as expectations are weighed to the downside for earnings and the economy," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
As of 1018 GMT, the dollar index was down 0.6 percent on the day at 83.886.
The euro rose 1.4 percent to 119.78 yen, near a session high of 120.01 yen. It bounced further from a six-week low of 116.24 yen hit the previous day on trading platform EBS.
The euro rose 0.7 percent to $1.3248, staying above a five-week low of $1.3025 hit on Thursday after the European Central Bank cut rates by a half percentage point to 2 percent, matching a record low rate.
The aid for Bank of America followed the U.S. Senate's decision to allow the second half of a $700 billion bank bailout programme, handing an early political victory to President-elect Barack Obama, who will be sworn in next Tuesday.
Earlier, Democratic leaders in the House of Representatives unveiled an $825 billion tax cut and spending bills they hope will help Obama reverse the economic slump, offsetting fears of soaring losses at the top three U.S. banks.
The dollar gained 0.6 percent to 90.36 yen, after hitting the day's high of 90.58 yen on EBS.
The Australian and New Zealand dollars both gained 1.4 percent.
Sterling surged, rising 1.8 percent to $1.4922.
Despite the optimism, investors also remained wary as the outlook for the global economy remained glum.
Data on Friday is expected to show U.S. consumer prices falling 0.2 percent in December from the same period a year ago, which if realised would be the first negative reading since the 1950s, analysts say. Core consumer prices, which exclude volatile food and energy prices, are seen rising 1.9 percent year-on-year.
Some analysts say that could further dampen the dollar.