* Euro gains vs dlr, yen; all eyes on U.S. GDP data
* Higher-yielding Aussie, yen also rebound; stocks edge up (Updates prices, adds quotes)
By Jessica Mortimer
LONDON, Oct 29 (Reuters) - The euro rose against the dollar and the yen on Thursday, recovering from recent losses as the market awaited key U.S. gross domestic product data which is expected to show a return to growth in the third quarter.
Perceived higher risk currencies such as the Australian and New Zealand dollars also rose sharply, buoyed by a recovery in equities, with traders saying many felt the steep falls on Wednesday and early Thursday had been overdone.
A solid GDP reading could help foster some renewed optimism about the global economy, but sentiment stayed shaky after a slew of recent weak U.S. data that triggered sharp falls in stocks and broad gains for the U.S. dollar and the yen.
Economists estimate that the government's advance estimate will show GDP grew 3.3 percent in the third quarter, which would mark the first quarter to show positive growth since the second quarter of 2008. The data is due at 1230 GMT.
"We were getting to the point where some currencies were looking heavily oversold on short-term measures and we are now seeing a bit of a comeback," said Naeem Wahid, currency strategist at Bank of Scotland Treasury.
Wahid highlighted the high degree of uncertainty about the likely outcome of the U.S. GDP figures and said a very strong number would enable renewed gains for higher risk currencies, while a particularly weak number would push the market back into risk averse mode.
By 1049 GMT, the euro gained 0.3 percent against the dollar to $1.4753 and was up 0.4 percent at 133.83 yen, recovering from earlier two-week lows of $1.4683 and 132.81 yen respectively.
Sentiment was helped by a modest recovery on stock markets, with European shares up 0.1 percent and U.S. stock futures rising 0.3-0.4 percent.
The dollar index fell 0.2 percent to 76.257. It has still gained just over 1 percent this week, however, leaving it on course for its biggest weekly gain in nearly five months.
Among higher-risk currencies, the Australian dollar was up 0.8 percent against the dollar at $0.9051 and up 0.8 percent against the yen at 82.13 yen.
On Wednesday, the Australian dollar fell around 2 percent against the U.S. dollar, clocking up its biggest one-day fall in nearly two months, while the New Zealand dollar shed 3 percent, its steepest drop since June.
The New Zealand dollar rose 0.9 percent against the dollar. It had fallen to a three-week low after the Reserve Bank of New Zealand (RBNZ) earlier dropped its easing bias as expected but faced down market pressure for a rate rise as soon as early 2010.
Against the yen, the U.S. dollar rose 0.1 percent to 90.73 yen.
U.S. DATA EYED
Thursday's data is expected to reveal that the world's largest economy has turned a corner, but U.S. data this week have raised questions about a sustained recovery, with consumer confidence dipping to recessionary levels and new home sales falling unexpectedly.
"The U.S. GDP numbers will be very important and perhaps the market is a bit hesitant ahead of this," said Elisabeth Andreew, currency strategist at Nordea in Copenhagen.
Given the risk-trade correction underway, some dealers said currency markets might react more to weaker figures than stronger ones, and if so, that could give the dollar a bit more strength short-term.
But Nordea's Andreew said it remains unclear whether the recent falls in riskier assets are the result of deteriorating fundamentals for the global economy, or whether they are simply the result of position-squaring and profit-taking.
Data on Thursday showing euro zone economic sentiment rose by much more than expected in October had little impact on the euro, with focus firmly on the U.S. data ahead. (Reporting by Jessica Mortimer; editing by Chris Pizzey)