* Yen reverses some losses on report Chrysler filing imminent
* Traders say report used to close positions after cross rise
* NZ dollar drops from 2-week high after RBNZ cuts rates
By Charlotte Cooper
TOKYO, April 30 (Reuters) - The yen pulled up from the deepest of the week's losses on Thursday as investors closed positions before a long weekend, spurred by a Wall Street Journal report that a bankruptcy filing by Chrysler was imminent.
The yen had fallen sharply on Wednesday and early Thursday when gains in stocks on optimism about an improving U.S. economic outlook prompted investors to unwind defensive positions taken out earlier in the week on swine flu worries.
But with May 1 holidays in countries around the world and a three-day holiday in Japan next week, traders said investors were keen to close positions, leading to a mild recovery in the yen.
The market has been watching struggling U.S. automakers' efforts to reach restructuring deals closely and traders said the WSJ report that a bankruptcy protection filing by Chrysler was "all but certain" had offered a chance for those looking to square positions.
"The market moved quite a long way yesterday and this morning, so I think it's more of a correction and the market was getting one-way (positive) on risks," said a senior trader at a European bank.
The dollar fell 0.4 percent on the day to 97.24 yen.
It climbed more than 1 percent on the yen on Wednesday following a less bleak economic outlook from the Federal Reserve and data showing that although U.S. growth for the first quarter was worse than expected, consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 2.2 percent.
The Fed said the pace of deterioration in the U.S. economy appeared to be slowing but it would continue to keep interest rates exceptionally low for an extended period.
The euro fell 0.1 percent to 129.41 yen, after jumping 2 percent on Wednesday. Trade was choppy and the euro earlier hit its highest in two weeks at 130.24 and then shed the gains.
It rose 0.3 percent to $1.3323, extending the previous day's rise, while the pound climbed against the dollar to its highest in nearly two weeks.
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The currency market initially shrugged off data on Japanese industrial production, which rose 1.6 percent in March, the first gain in six months and twice the rise expected.
The Bank of Japan kept interest rates on hold and held off on any new initiatives as it gauges whether the measures it has taken so far to ease credit strains are helping alleviate the country's worst recession since World War Two.
In its half-yearly report it said the economy was likely to start recovering moderately in the October-March second half of this financial year, and it lowered its economic forecast for 2009/10 to a 3.1 percent contraction from its previous outlook for a 2 percent contraction.
The New Zealand dollar fell from a two-week high after the country's central bank cut interest rates by 50 basis points to a record low of 2.5 percent and committed to keeping rates low until late 2010 to fight the country's worst-ever recession.
The New Zealand dollar stood at $0.5668 after climbing as high as $0.5778 before the rate decision. (Additional reporting by Kaori Kaneko; Editing by Chris Gallagher)