* GDP data, ADP report show economy still improving
* Dollar index falls more than 4 pct in 3rd quarter
* Swiss franc down, traders cite talk of SNB action (Adds comment, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Sept 30 (Reuters) - The dollar fell against major currencies on Wednesday as expectations that the U.S. economy was recovering dampened safe-haven demand for the greenback.
The Swiss franc, meanwhile, fell against the euro with traders citing talk the Swiss National Bank may have intervened to weaken its currency. The SNB declined comment on the franc's price action.
Data showing the U.S. economy contracted in the second quarter more slowly than initially thought kept the euro and sterling firm, while the higher-yielding Australian and New Zealand dollars rallied.
The foreign exchange market shrugged off a September Midwest manufacturing report that fell unexpectedly and pointed to shrinking factory activity.
"Markets are still very optimistic," said Kathy Lien, director of currency research at GFT Forex in New York. "That's helping ease safe-haven flows out of the dollar and continue to benefit the high-yielding currencies."
She said the revised gross domestic product figure "indicates that the United States is pretty much emerging out of recession and there's very good chance we are going to see positive GDP growth in the third-quarter."
In afternoon trading, the euro rose 0.4 percent to $1.4643, on track for a quarterly gain of 4.3 percent.
The dollar fell 0.6 percent to 89.59 yen. It's dropped about 7 percent in the third quarter.
Traders said losses in the dollar have been compounded by quarter-end flows related to foreign portfolios. Since both the U.S. stock and bond markets rose in the third quarter and boosted foreign funds' dollar holdings, managers needed to sell dollars to maintain hedge ratios at the end of the quarter.
Lien added that for the last couple of days, the dollar had benefited from quarter-end flows as U.S. corporations repatriated their foreign earnings.
"Now we're in the last trading days of the quarter ... we're seeing the flow being reversed and the dollar continues its downtrend," she said.
PATH TO RECOVERY
The ICE Futures dollar index was down 0.51 percent at 76.731. The index was down 4.4 percent in the quarter and 1.9 percent weaker in September.
The U.S. economy contracted at a 0.7 percent annual rate instead of the 1.0 percent decline reported last month, the Commerce Department said. It's probably the last quarter of falling output for the U.S. economy, which is believed to have rebounded in the July-September quarter. see ID:nN30198553.
A separate U.S. survey by ADP Employer Services, which came two days before the government's report on nonfarm payrolls, showed some improvement in the private jobs sector. Although private companies slashed 254,000 jobs in September, more than the 210,000 layoffs the market had been expecting, the number was down from the 277,000 jobs lost in August.
The U.S. economy is starting a tentative recovery but it is too early to embark on a full-on exit from the Federal Reserve's accommodative policies, Atlanta Federal Reserve Bank President Dennis Lockhart said on Wednesday.
Against the Swiss franc, the dollar reversed earlier gains to trade little changed at 1.0361 francs while the euro rose 0.4 percent to 1.5172 francs.
Sterling edged up 0.3 percent to $1.5999. The Australian dollar rose 1.4 percent to US$0.8826. In the third quarter, the Aussie currency gained 9.4 percent. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Kenneth Barry)